-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S0xNcb19+8WAC8TVB6qbKyvyBSnNmoiNtyc+Q+BsX3Bx/uCmGa/A8fo59reV2725 23fGAy8ALv0GqxloOkKrog== 0000893220-04-001568.txt : 20040804 0000893220-04-001568.hdr.sgml : 20040804 20040804112034 ACCESSION NUMBER: 0000893220-04-001568 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: YORK INTERNATIONAL CORP /DE/ CENTRAL INDEX KEY: 0000842662 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 133473472 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10863 FILM NUMBER: 04950406 BUSINESS ADDRESS: STREET 1: 631 S RICHLAND AVE CITY: YORK STATE: PA ZIP: 17403 BUSINESS PHONE: 7177717890 MAIL ADDRESS: STREET 1: 631 SOUTH RICHLAND AVENUE CITY: YORK STATE: PA ZIP: 17403 FORMER COMPANY: FORMER CONFORMED NAME: YORK HOLDINGS CORP DATE OF NAME CHANGE: 19910930 10-Q 1 w99481e10vq.txt FORM 10-Q FOR THE QUARTERLY PERIOD ENDED 6/30/04 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004 COMMISSION FILE NUMBER 1-10863 YORK INTERNATIONAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-3473472 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 631 SOUTH RICHLAND AVENUE, YORK, PA 17403 (717) 771-7890 (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 3, 2004 ----- ----------------------------- Common Stock, par value $.005 41,421,197 shares YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004 INDEX
Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Operations - (unaudited) Three and Six Months Ended June 30, 2004 and 2003 3 Condensed Consolidated Balance Sheets - June 30, 2004 (unaudited) and December 31, 2003 4 Condensed Consolidated Statements of Cash Flows - (unaudited) Six Months Ended June 30, 2004 and 2003 5 Notes to Condensed Consolidated Financial Statements (unaudited) 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 18 Item 3. Quantitative and Qualitative Disclosures About Market Risk 26 Item 4. Controls and Procedures 26 PART II. OTHER INFORMATION Item 1. Legal Proceedings 27 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities 27 Item 3. Defaults Upon Senior Securities 27 Item 4. Submission of Matters to a Vote of Security Holders 27 Item 5. Other Information 28 Item 6. Exhibits 28 Signatures 30 Exhibit Index 31
2 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Statements of Operations (unaudited) (in thousands, except per share data)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2004 2003 2004 2003 ----------- ------------ ----------- ----------- Net sales: Products $ 1,104,388 $ 975,073 $ 1,938,106 $ 1,744,116 Services 117,320 109,344 222,969 208,658 ----------- ----------- ----------- ----------- Net sales 1,221,708 1,084,417 2,161,075 1,952,774 Cost of goods sold: Products (902,001) (771,758) (1,580,586) (1,398,963) Services (94,032) (86,295) (183,758) (167,347) ----------- ----------- ----------- ----------- Cost of goods sold (996,033) (858,053) (1,764,344) (1,566,310) ----------- ----------- ----------- ----------- Gross profit 225,675 226,364 396,731 386,464 Selling, general and administrative expenses (177,303) (156,796) (343,484) (305,828) Restructuring and other charges, net -- (33,060) -- (49,154) ----------- ----------- ----------- ----------- Income from operations 48,372 36,508 53,247 31,482 Interest expense, net (10,072) (12,115) (20,933) (24,131) Equity in earnings of affiliates 4,227 2,477 4,719 3,565 ----------- ----------- ----------- ----------- Income before income taxes 42,527 26,870 37,033 10,916 Provision for income taxes (4,131) (7,664) (2,840) (5,346) ----------- ----------- ----------- ----------- Net income $ 38,396 $ 19,206 $ 34,193 $ 5,570 =========== =========== =========== =========== Basic earnings per share $ 0.94 $ 0.48 $ 0.84 $ 0.14 =========== =========== =========== =========== Diluted earnings per share $ 0.91 $ 0.48 $ 0.81 $ 0.14 =========== =========== =========== =========== Cash dividends per share $ 0.20 $ 0.15 $ 0.40 $ 0.30 =========== =========== =========== =========== Weighted average common shares and common equivalents outstanding: Basic 41,037 39,631 40,819 39,594 Diluted 42,270 39,861 42,050 39,748
See accompanying supplemental notes to condensed consolidated financial statements. 3 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands)
JUNE 30, 2004 DECEMBER 31, (UNAUDITED) 2003 ------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 50,584 $ 49,650 Receivables, net 797,079 638,510 Inventories: Raw material 147,051 138,108 Work in progress 172,203 147,094 Finished goods 253,116 227,512 ------------ ------------ Total inventories 572,370 512,714 Prepayments and other current assets 130,863 129,921 ------------ ------------ Total current assets 1,550,896 1,330,795 Deferred income taxes 101,132 107,566 Investments in affiliates 32,193 28,200 Property, plant and equipment, net 537,061 541,118 Goodwill 526,822 529,182 Intangibles, net 35,711 36,744 Deferred charges and other assets 99,033 99,530 ------------ ------------ Total assets $ 2,882,848 $ 2,673,135 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of long-term debt $ 20,448 $ 30,755 Accounts payable and accrued expenses 1,018,774 899,093 Income taxes 26,662 38,453 ------------ ------------ Total current liabilities 1,065,884 968,301 Long-term warranties 52,460 46,888 Long-term debt 671,011 582,027 Postretirement and postemployment benefits 242,915 249,912 Other long-term liabilities 51,438 49,607 ------------ ------------ Total liabilities 2,083,708 1,896,735 Stockholders' equity 799,140 776,400 ------------ ------------ Total liabilities and stockholders' equity $ 2,882,848 $ 2,673,135 ============ ============
See accompanying supplemental notes to condensed consolidated financial statements. 4 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (unaudited) (in thousands)
SIX MONTHS ENDED JUNE 30, 2004 2003 ---------- ---------- Cash flows from operating activities: Net income $ 34,193 $ 5,570 Adjustments to reconcile net income to net cash (used) provided by operating activities: Depreciation and amortization of property, plant and equipment 35,038 33,288 Amortization of deferred charges and intangibles 1,649 1,764 Provision for doubtful receivables 6,712 7,038 Effect of non-cash charges -- 31,185 Deferred income taxes (6,560) 9,699 Loss on sale of fixed assets 535 761 Other 537 (1,709) Change in assets and liabilities net of effects from acquisitions and divestitures: Receivables, net (171,684) (68,380) Inventories (63,624) (49,730) Prepayments and other current assets 10,490 (31,478) Accounts payable and accrued expenses 124,131 92,939 Income taxes (11,831) (1,074) Other long-term assets and liabilities 1,174 4,917 ---------- ---------- Net cash (used) provided by operating activities (39,240) 34,790 ---------- ---------- Cash flows from investing activities: Purchases of other companies, net of cash acquired (728) (3,160) Capital expenditures (37,105) (35,916) Proceeds from sale of fixed assets 954 170 ---------- ---------- Net cash used by investing activities (36,879) (38,906) ---------- ---------- Cash flows from financing activities: Net payments of short-term debt (9,899) (245) Net proceeds from credit agreement -- 20,000 Payment of senior notes -- (100,000) Net proceeds from other long-term debt 88,751 49,621 Net reduction in sale of receivables -- (5,000) Common stock issued 14,980 322 Treasury stock purchases (74) (5) Dividends paid (16,478) (11,904) ---------- ---------- Net cash provided (used) by financing activities 77,280 (47,211) ---------- ---------- Effect of exchange rate changes on cash and cash equivalents (227) (421) ---------- ---------- Net increase (decrease) in cash and cash equivalents 934 (51,748) Cash and cash equivalents at beginning of period 49,650 92,940 ---------- ---------- Cash and cash equivalents at end of period $ 50,584 $ 41,192 ========== ==========
See accompanying supplemental notes to condensed consolidated financial statements. 5 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes To Condensed Consolidated Financial Statements (unaudited) (1) FINANCIAL STATEMENTS The condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. We believe that the information presented is not misleading and the disclosures are adequate. In our opinion, the condensed consolidated financial statements contain all adjustments necessary to present fairly our financial position as of June 30, 2004 and December 31, 2003, results of operations for the three and six months ended June 30, 2004 and 2003, and cash flows for the six months ended June 30, 2004 and 2003. Our results of operations for interim periods are not necessarily indicative of results expected for the full year. Certain reclassifications have been made to the 2003 condensed consolidated financial statements to conform to the 2004 presentation. (2) STOCK-BASED COMPENSATION We apply the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for our stock-based compensation plans. Accordingly, no compensation expense has been recognized for our stock-based compensation plans other than restricted stock and performance-based awards. Had compensation expense for all stock and employee stock purchase plans been determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," as amended, our net income and earnings per share would have been adjusted to the pro forma amounts as follows (in thousands, except per share data):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2004 2003 2004 2003 ------------ ------------ ------------ ------------ Net income - as reported $ 38,396 $ 19,206 $ 34,193 $ 5,570 Add: Stock-based employee compensation expense included in reported net income, net of related tax effects 571 256 877 279 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (1,633) (977) (2,733) (3,166) ------------ ------------ ------------ ------------ Pro forma net income $ 37,334 $ 18,485 $ 32,337 $ 2,683 ============ ============ ============ ============ Earnings per share: Basic - as reported $ 0.94 $ 0.48 $ 0.84 $ 0.14 Basic - pro forma 0.91 0.47 0.79 0.07 Diluted - as reported 0.91 0.48 0.81 0.14 Diluted - pro forma 0.88 0.46 0.77 0.07
Since the determination of fair value of all stock options granted includes variable factors, including volatility, and additional stock option grants are expected to be made each year, the above pro forma disclosures are not representative of pro forma effects on reported net income and earnings per share for future periods. 6 (3) RECEIVABLES, NET Pursuant to the terms of an annually renewable revolving facility, we sell certain of our trade receivables to a wholly-owned, consolidated subsidiary, York Receivables Funding LLC (YRFLLC). In turn, YRFLLC sells, on a revolving basis, an undivided ownership interest in the purchased trade receivables to bank-administered asset-backed commercial paper vehicles. In May 2004, we amended the facility, increasing the availability from $150 million to $200 million. We continue to service sold trade receivables. No servicing asset or liability has been recognized as our cost to service sold trade receivables approximates the servicing income. In accordance with the facility, YRFLLC has sold $150 million of an undivided interest in trade receivables as of June 30, 2004 and December 31, 2003. The proceeds from the sale were reflected as a reduction of net receivables reflected in our condensed consolidated balance sheets as of June 30, 2004 and December 31, 2003. The discount rate on trade receivables sold was 1.26% and 1.12% as of June 30, 2004 and December 31, 2003, respectively. The program fee on trade receivables sold was 0.4% and 0.5% as of June 30, 2004 and December 31, 2003, respectively. (4) GOODWILL The changes in the carrying amount of goodwill for the six months ended June 30, 2004 by segment, are as follows (in thousands):
NET FOREIGN BALANCE AS OF GOODWILL CURRENCY BALANCE AS OF DEC. 31, 2003 ACQUIRED FLUCTUATION JUNE 30, 2004 ------------- -------- ----------- ------------- Global Applied: Americas $ 92,949 $ -- $ (197) $ 92,752 Europe, Middle East and Africa 130,166 429 (2,512) 128,083 Asia 109,314 -- (80) 109,234 ------------- -------- ----------- ------------ 332,429 429 (2,789) 330,069 Unitary Products Group 140,440 -- -- 140,440 Bristol Compressors 56,313 -- -- 56,313 ------------- -------- ----------- ------------ $ 529,182 $ 429 $ (2,789) $ 526,822 ============= ======== =========== ============
(5) INTANGIBLES, NET The following table summarizes the major intangible asset classes subject to amortization included in our condensed consolidated balance sheets as of June 30, 2004 and December 31, 2003 (in thousands):
GROSS CARRYING ACCUMULATED NET CARRYING AMOUNT AMORTIZATION AMOUNT -------------- ------------ ------------- June 30, 2004 Trade names and trademarks $40,821 $ 6,865 $33,956 Other 3,005 1,250 1,755 ------- ------- ------- $43,826 $ 8,115 $35,711 ======= ======= ======= December 31, 2003 Trade names and trademarks $42,028 $ 6,723 $35,305 Other 2,536 1,097 1,439 ------- ------- ------- $44,564 $ 7,820 $36,744 ======= ======= =======
Amortization expense for trade names and trademarks and other intangible assets for the three and six months ended June 30, 2004 was $0.4 million and $0.8 million, respectively. For the three and six months ended June 30, 2003, amortization expense for trade names and trademarks and other intangible assets was $0.5 million and $0.9 million, respectively. 7 The following table estimates the amount of amortization expense for trade names and trademarks and other intangible assets for the remainder of 2004 and each of the fiscal years indicated (in thousands): 2004 (July 1 - December 31) $ 791 2005 1,655 2006 1,655 2007 1,555 2008 1,555 Thereafter 28,500 -------------- $ 35,711 ==============
(6) NOTES PAYABLE AND LONG-TERM DEBT Notes payable and long-term debt consist of (in thousands):
JUNE 30, DECEMBER 31, 2004 2003 --------- ------------ Notes payable and current portion of long-term debt: Bank loans (primarily foreign currency) $ 17,885 $ 27,784 Current portion of long-term debt 2,563 2,971 --------- --------- Total $ 20,448 $ 30,755 ========= ========= Long-term debt: Domestic bank lines at an average rate of 2.05% in 2004 and 1.58% in 2003 $ 117,200 $ 25,000 Danish retail notes, 2% interest, due October 2004 40,950 41,844 Senior notes, 6.625% interest, due August 2006 200,000 200,000 Senior notes, 6.7% interest, due June 2008 200,000 200,000 Senior notes, 5.8% interest, due November 2012 100,000 100,000 Other (primarily foreign bank loans) at an average rate of 6.08% in 2004 and 6.3% in 2003 15,424 18,154 --------- --------- Total 673,574 584,998 Less current portion (2,563) (2,971) --------- --------- Noncurrent portion $ 671,011 $ 582,027 ========= =========
The domestic bank lines and the Danish retail notes are classified as long-term, as they are supported by our Five Year Credit Agreement. 8 The following table summarizes the terms of our lines of credit (in thousands):
LIMIT AVAILABILITY (a) JUNE 30, DEC. 31, JUNE 30, DEC. 31, BORROWING ANNUAL 2004 2003 2004 2003 EXPIRES RATE (b) FEE -------- -------- -------- -------- ---------- --------- ------ Five Year Credit LIBOR + Agreement $400,000 $400,000 $400,000 $400,000 May 29, 2006 1.175% 0.2% 364-Day Credit LIBOR + Agreement (c) 200,000 200,000 200,000 200,000 March 11, 2005 0.85% 0.15% Domestic bank lines 150,000 135,000 32,800 110,000 Uncommitted Various -- Non-U.S bank credit facilities 386,100 355,246 251,072 246,298 Uncommitted Various --
(a) Availability is reduced for outstanding borrowings and bank guarantee and letters of credit usage. (b) The one-month LIBOR (London Interbank Offering Rate) rate was 1.37% and 1.12% as of June 30, 2004 and December 31, 2003, respectively. (c) We renewed our 364-Day Credit Agreement in March 2004. (7) POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS PENSION PLANS Effective January 1, 2004, we replaced our defined benefit pension plans for U.S. salaried non-bargaining and certain U.S. salaried bargaining employees with a new defined contribution plan. Net periodic benefit cost includes the following components (in thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2004 2003 2004 2003 ------------- ------------- ------------- ------------- Components of net periodic benefit cost: Service cost $ 2,917 $ 4,741 $ 6,143 $ 10,546 Interest cost 7,971 7,418 16,423 16,572 Expected return on plan assets, income (10,062) (8,198) (20,324) (18,477) Amortization of prior service cost 550 736 1,122 1,705 Amortization of net loss 664 457 1,332 932 Settlement and other -- 289 1,049 289 ------------- ------------- ------------- ------------- Net periodic benefit cost $ 2,040 $ 5,443 $ 5,745 $ 11,567 ============= ============= ============= =============
We previously disclosed in our consolidated financial statements for the year ended December 31, 2003 that we expected to contribute $14.3 million to our pension plans in 2004. As of June 30, 2004, $9.7 million of contributions have been made. We currently anticipate contributing an additional $4.4 million to fund our plans in 2004 for a total of $14.1 million. 9 DEFINED CONTRIBUTION PLANS Effective January 1, 2004, certain U.S. employees participate in our new defined contribution plan. We contribute a cash amount to the plan on an annual basis, based on employees' eligible earnings, vesting service, and age. We recorded expense of approximately $2.4 million and $5.2 million related to the plan in the three and six months ended June 30, 2004, respectively. Certain employees participate in various other investment plans. Under the plans, the employees may voluntarily contribute a percentage of their compensation. We contribute a cash amount based on the participants' contributions. Our contributions to plans were approximately $0.9 million and $1.7 million in the three and six months ended June 30, 2004, respectively, and $0.4 million and $0.7 million in the three and six months ended June 30, 2003, respectively. We recorded expense of approximately $1 million and $2 million related to the plans in the three and six months ended June 30, 2004, respectively, and $0.4 million and $0.8 million related to the plans in the three and six months ended June 30, 2003, respectively. POSTRETIREMENT HEALTH AND LIFE INSURANCE PLANS Net periodic benefit cost includes the following components (in thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2004 2003 2004 2003 ------------- ------------- ------------- ------------- Components of net periodic benefit cost: Service cost $ 321 $ 618 $ 675 $ 1,032 Interest cost 1,908 2,863 3,969 4,782 Amortization of prior service cost (1,370) (838) (2,730) (1,400) Amortization of net loss 872 1,110 1,972 1,855 ------------- ------------- ------------- ------------- Net periodic benefit cost $ 1,731 $ 3,753 $ 3,886 $ 6,269 ============= ============= ============= =============
We previously disclosed in our consolidated financial statements for the year ended December 31, 2003 that we expected to contribute $7.4 million to our postretirement health and life insurance plans in 2004. As of June 30, 2004, $4.4 million of contributions have been made. We currently anticipate contributing an additional $3.6 million to fund our plans in 2004 for a total of $8 million. (8) GUARANTEES AND WARRANTIES We issue various types of guarantees in the normal course of business. As of June 30, 2004, we have the following guarantees outstanding (in thousands): Standby letters of credit and surety bonds $ 111,402 Performance guarantees 170,185 Commercial letters of credit 4,013 Guarantee of affiliate debt 30,000
Changes in our warranty liabilities for the three and six months ended June 30, 2004 are as follows (in thousands):
ACCRUALS BALANCE PAYMENTS ACCRUALS FOR FOR BALANCE AS OF MADE UNDER WARRANTIES PREEXISTING AS OF MARCH 31, 2004 WARRANTIES ISSUED WARRANTIES JUNE 30, 2004 - ---------------- ---------- ------------ ----------- ------------- $102,683 $(17,580) $18,997 $20,000 $124,100
10
ACCRUALS BALANCE PAYMENTS ACCRUALS FOR FOR BALANCE AS OF MADE UNDER WARRANTIES PREEXISTING AS OF DEC. 31, 2003 WARRANTIES ISSUED WARRANTIES JUNE 30, 2004 - ------------- ---------- ------------ ----------- ------------- $ 101,675 $ (35,172) $ 37,597 $ 20,000 $ 124,100
During the second quarter of 2004, we finalized field and factory testing to investigate failures found in heat exchangers of certain sealed combustion gas furnaces used in the manufactured housing industry. We found that installation and application factors combined with component part variation can result in excessive heat exchanger temperatures, which may contribute to failures in certain furnace models manufactured in the years 1995 to 2000. We no longer produce these furnace models. As a result, we recorded a $20 million warranty charge for the Unitary Products Group furnace inspection and remediation program during the second quarter of 2004. The $20 million warranty charge represents our best estimate of repair costs within a reasonable estimated range of $13 million and $30 million. Repair cost estimates are mainly comprised of the expected cost of repair kits or new heat exchangers and installation labor. Our estimates are based upon the projected number of furnace units to be serviced (find rate), current repair costs, and the estimated number of furnace units requiring repair. Differences between estimated and actual find rate, costs to manufacture and install repair kits or heat exchangers, and number of furnace units that require repair could have a significant impact on our consolidated results of operations. We expect to begin repairs in the third quarter of 2004 and complete repairs by the end of 2006. Warranties include standard warranties and extended warranty contracts sold to customers to increase the warranty period beyond the standard period. Extended warranty contracts sold are reflected as accruals for warranties issued and amortized revenue is reflected as payments made under warranties in the above table. (9) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES We are exposed to market risk associated with changes in interest rates, foreign currency exchange rates, and certain commodity prices. To enhance our ability to manage these market risks, we enter into derivative instruments for periods consistent with the related underlying hedged exposures. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in fair value or cash flows of the underlying hedged exposures. We mitigate the risk that the counter-party to these derivative instruments will fail to perform by only entering into derivative instruments with major financial institutions. We do not typically hedge our market risk exposures beyond three years and do not hold or issue derivative instruments for trading purposes. Recognized gains or losses in cost of goods sold due to the discontinuance of ineffective currency and commodity cash flow hedges for the three and six months ended June 30, 2004 and 2003 were immaterial. Currency Rate Hedging We manufacture and sell our products in a number of countries throughout the world, and therefore, are exposed to movements in various currencies against the U.S. dollar and against the currencies in which we manufacture. Through our currency hedging activities, we seek to minimize the risk that cash flows resulting from the sale of products, manufactured in a currency different from the currency used by the selling subsidiary, will be affected by changes in foreign currency exchange rates. Foreign currency derivative instruments (forward contracts) are matched to the underlying foreign currency exposures and are executed to minimize foreign exchange transaction costs. As of June 30, 2004, we forecasted that $0.4 million of net gains in accumulated other comprehensive losses will be reclassified into earnings within the next twelve months. Hedges of Net Investment We issued Danish denominated, retail notes as a hedge to protect the value of a portion of our net investment in a Danish subsidiary. Hedges of a net investment are accounted for under SFAS No. 52, "Foreign Currency Translation." Under SFAS No. 52, the gains or losses on a foreign-denominated, nonderivative financial instrument designated as a hedge of a net investment are recorded in foreign currency translation adjustments within accumulated other comprehensive losses. The gains and losses are accounted for in a similar manner as the foreign denominated net assets, offsetting a portion of the change in net assets due to foreign currency fluctuations. As of June 30, 2004, we have designated $41 million in Danish retail notes as a hedge of a net investment. 11 Commodity Price Hedging We purchase raw material commodities and are at risk for fluctuations in the market price of those commodities. In connection with the purchase of major commodities, principally copper for manufacturing requirements, we enter into commodity swap contracts to effectively fix our cost of the commodity. These contracts require each settlement between us and our counterparty to coincide with cash market purchases of the actual commodity. As of June 30, 2004, we forecasted that $10.1 million of net gains in accumulated other comprehensive losses will be reclassified into earnings within the next twelve months. Interest Rate Hedging We manage our interest rate risk by entering into both fixed and variable rate debt. In addition, we enter into interest rate swap contracts in order to achieve a balanced mix of fixed and variable rate indebtedness. In May 2004, we entered into a $100 million notional amount interest rate swap contract with a final maturity at November 2012. As of June 30, 2004, we had interest rate swap contracts to pay variable interest, based on the six-month LIBOR rate, and receive a blended fixed rate of interest of 6.2125% on a notional amount of $200 million ($100 million related to the senior notes due August 2006 and $100 million related to the senior notes due November 2012). As of June 30, 2004, the fair value of these swap contracts was an unrealized gain of $6.9 million. We have designated our outstanding interest rate swap contracts as fair value hedges of underlying fixed rate debt obligations. The fair value of these contracts is recorded in other long-term assets or liabilities with a corresponding increase or decrease in the fixed rate debt obligations. The change in fair values of both the fair value hedge instruments and the underlying debt obligations are recorded as equal and offsetting unrealized gains and losses in the net interest expense component of the condensed consolidated statements of operations. All existing fair value hedges are determined to be 100% effective under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. As a result, there is no impact on current earnings resulting from hedge ineffectiveness. (10) COMPREHENSIVE INCOME Comprehensive income is determined as follows (in thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2004 2003 2004 2003 ----------- ------------ ---------- ----------- Net income $ 38,396 $ 19,206 $ 34,193 $ 5,570 Other comprehensive (loss) income: Foreign currency translation adjustment (3,401) 50,194 (12,601) 57,925 Cash flow hedges: Reclassification adjustment, net of tax 2,147 (674) 3,437 (1,285) Net derivative (loss) income, net of tax (7,811) 1,457 (4,116) 2,305 Available for sale securities, net of tax (35) (21) 2 (21) ----------- ----------- ---------- ---------- Comprehensive income $ 29,296 $ 70,162 $ 20,915 $ 64,494 =========== =========== ========== ==========
12 (11) STOCKHOLDERS' EQUITY The following table summarizes our stockholders' equity as of June 30, 2004 and December 31, 2003 (in thousands, except per share data):
JUNE 30, DECEMBER 31, 2004 2003 --------- ------------ Common stock $.005 par value; 200,000 shares authorized; issued 46,278 shares at June 30, 2004 and 46,248 shares at December 31, 2003 $ 231 $ 231 Additional paid-in capital 732,325 732,339 Retained earnings 316,910 299,195 Accumulated other comprehensive losses (64,875) (51,597) Treasury stock, at cost; 4,962 shares at June 30, 2004 and 5,420 shares at December 31, 2003 (183,866) (200,856) Unearned compensation (1,585) (2,912) --------- --------- Total stockholders' equity $ 799,140 $ 776,400 ========= =========
(12) EARNINGS PER SHARE Net income as set forth in our condensed consolidated statements of operations is used in the computation of basic and diluted earnings per share information. Reconciliations of shares used in the computations of earnings per share are as follows (in thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2004 2003 2004 2003 ------------ ------------ ----------- ----------- Weighted average common shares outstanding used in the computation of basic earnings per share 41,037 39,631 40,819 39,594 Effect of dilutive securities: Non-vested restricted shares 371 96 371 96 Stock options 862 134 860 58 ------ ------ ------ ------ Weighted average common shares and equivalents used in the computation of diluted earnings per share 42,270 39,861 42,050 39,748 ====== ====== ====== ====== Stock options not included in the earnings per share computation as their effect would have been anti- dilutive 984 4,072 984 4,072 ====== ====== ====== ======
(13) SEGMENT INFORMATION Our global business operates in the heating, ventilating, air conditioning, and refrigeration (HVAC&R) industry. Our organization consists of Global Applied, Unitary Products Group, and Bristol Compressors. The Global Applied business is comprised of three geographic regions: Americas; Europe, Middle East and Africa (EMEA); and Asia. Global Applied's three geographic regions, Unitary Products Group, and Bristol Compressors represent our reportable segments. 13 Global Applied designs, produces, markets, and sells HVAC&R equipment and solutions and provides maintenance and service of equipment manufactured by us and by others. Types of equipment include air-cooled and water-cooled chillers, central air handling units, variable air volume units, screw and reciprocating compressors, condensers, evaporators, heat exchangers, ductless minisplits, process refrigeration systems, hygienic air distribution systems, gas compression systems, and control equipment to monitor and control the entire system. Heating and air conditioning solutions are provided for buildings ranging from small office buildings and fast food restaurants to large commercial and industrial complexes. Refrigeration systems are provided for industrial applications in the food, beverage, chemical and petroleum industries. Cooling and refrigeration systems are also supplied for use on naval, commercial and passenger vessels. Unitary Products Group (UPG) produces heating and air conditioning solutions for buildings ranging from private homes and apartments to small commercial buildings. UPG products include ducted central air conditioning and heating systems (air conditioners, heat pumps, and furnaces), and light commercial heating and cooling equipment. Bristol Compressors (Bristol) manufactures reciprocating and scroll compressors for our use and for sale to original equipment manufacturers and wholesale distributors. Bristol purchases an essential component from one vendor. Due to consolidation in the vendor's industry, there are limited alternate sources of supply. We believe an alternate source of supply is attainable in the event the current vendor is unable to supply the component. However, a change in vendors would cause a delay in manufacturing and loss of sales, which would adversely impact the results of operations of Bristol and our consolidated results of operations. General corporate expenses and charges and other expenses are not allocated to the individual segments for management reporting purposes. General corporate expenses include certain incentive compensation, pension, medical and insurance costs; corporate administrative costs; development costs for information technology applications and infrastructure; the $20 million warranty charge discussed in note 8; and other corporate costs. Charges and other expenses in 2003 include restructuring and other charges and operating expenses related to cost reduction actions. Non-allocated assets primarily consist of prepaid pension benefit cost, net deferred tax assets, LIFO inventory reserves, and other corporate assets. For management reporting purposes, intersegment sales are recorded on a cost-plus or market price basis. Business segment management compensation is based on segment earnings before interest and taxes, segment net capital employed, and consolidated earnings per share. 14 The table below represents our operating results and assets by segment (in thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2004 2003 2004 2003 ------------ ------------ ----------- ----------- Net sales: Global Applied: Americas $ 394,424 $ 362,839 $ 727,223 $ 660,252 EMEA 384,403 335,702 682,824 597,754 Asia 163,485 131,987 266,269 222,106 Intragroup sales (59,470) (54,252) (104,461) (94,618) ------------ ------------ ----------- ----------- 882,842 776,276 1,571,855 1,385,494 Unitary Products Group 258,115 222,949 438,506 386,491 Bristol Compressors 138,965 138,837 252,443 276,399 Eliminations(1) (58,214) (53,645) (101,729) (95,610) ------------ ------------ ----------- ----------- 1,221,708 1,084,417 2,161,075 1,952,774 ============ ============ =========== =========== (1)Eliminations include the following intersegment sales: Global Applied (400) (595) (1,131) (1,181) Unitary Products Group (18,058) (17,787) (31,792) (30,476) Bristol Compressors (39,756) (35,263) (68,806) (63,953) ------------ ------------ ----------- ----------- Eliminations (58,214) (53,645) (101,729) (95,610) ============ ============ =========== =========== Income from operations: Global Applied: Americas 23,313 16,815 24,999 14,059 EMEA 14,600 12,451 14,591 13,040 Asia 22,082 22,423 31,656 32,116 ------------ ------------ ----------- ----------- 59,995 51,689 71,246 59,215 Unitary Products Group 30,191 24,049 42,217 32,269 Bristol Compressors 4,242 11,930 8,320 23,259 General corporate expenses, eliminations, and other non-allocated items (46,056) (16,130) (68,536) (30,245) Charges and other -- (35,030) -- (53,016) expenses ------------ ------------ ----------- ----------- 48,372 36,508 53,247 31,482 ------------ ------------ ----------- ----------- Interest expense, net (10,072) (12,115) (20,933) (24,131) ------------ ------------ ----------- ----------- Equity in earnings of affiliates: Global Applied: EMEA 2,706 972 3,090 1,387 Asia 337 332 453 528 ------------ ------------ ----------- ----------- 3,043 1,304 3,543 1,915 Bristol Compressors 1,184 1,173 1,176 1,650 ------------ ------------ ----------- ----------- 4,227 2,477 4,719 3,565 ------------ ------------ ----------- ----------- Income before income taxes 42,527 26,870 37,033 10,916 Provision for income taxes (4,131) (7,664) (2,840) (5,346) ------------ ------------ ----------- ----------- Net income $ 38,396 $ 19,206 $ 34,193 $ 5,570 ============ ============ =========== ===========
15
JUNE 30, 2004 DEC. 31, 2003 ------------- ------------ Total assets: Global Applied: Americas $ 782,789 $ 711,103 EMEA 965,991 937,981 Asia 425,933 389,456 Eliminations and other non-allocated assets (102,615) (111,789) ------------- ------------ 2,072,098 1,926,751 Unitary Products Group 476,120 384,355 Bristol Compressors 283,525 242,375 Eliminations and other non-allocated assets 51,105 119,654 ------------- ------------ $ 2,882,848 $ 2,673,135 ============= ============
(14) CHARGES TO OPERATIONS In 2003, we initiated actions to further reduce our overall cost structure and support the implementation of our new geographic organization. In addition to cost reductions associated with the consolidation of our former Engineered Systems Group and York Refrigeration Group segments, additional actions included the further reduction of manufacturing capacity, the elimination of certain product lines, and the exiting of several small, non-core businesses. All actions were substantially completed by December 31, 2003. In the three and six months ended June 30, 2003, we incurred costs by segment as follows (in thousands):
THREE MONTHS SIX MONTHS ENDED JUNE 30, 2003 ENDED JUNE 30, 2003 ------------------- --------------------- Global Applied: Americas $ 3,144 $ 6,715 EMEA 22,910 35,255 Asia 696 2,766 -------- -------- 26,750 44,736 Unitary Products Group 7,500 7,500 Bristol Compressors 28 28 -------- -------- Total charges to operations, net 34,278 52,264 Charges reflected in cost of goods sold (1,218) (3,110) -------- -------- Restructuring and other charges, net $ 33,060 $ 49,154 ======== ========
Charges included write-downs for the impairment of assets relating to businesses or facilities to be closed or divested, severance and other accruals relating to planned reductions in workforce throughout the Company, and estimated costs related to the elimination of certain product lines. 16 Detail of activity relating to the 2003 initiatives in the six months ended June 30, 2004 is as follows (in thousands):
ACCRUALS ESTABLISHED UTILIZED IN SIX IN SIX MONTHS MONTHS REMAINING ACCRUALS AT ENDED ENDED ACCRUALS AT DEC. 31, JUNE 30, JUNE 30, JUNE 30, 2003 2004 2004 2004 ----------- ----------- -------- ----------- Severance 16,537 -- 9,353 7,184 Contractual obligations 6,156 -- 1,522 4,634 Other 1,220 -- 1,125 95 ----------- ----------- -------- ----------- $ 23,913 $ -- $ 12,000 $ 11,913 =========== =========== ======== ===========
Substantially all of the severance accrual will be utilized in 2004. (15) PROPOSED ACCOUNTING STANDARDS In March 2004, the Financial Accounting Standards Board (FASB) issued Proposed Statement of Financial Accounting Standards "Share-Based Payment," an amendment of FASB Statements No. 123 and 95. This proposed statement addresses the accounting for share-based compensation in which we exchange employee services for (a) our equity instruments or (b) liabilities that are based on the fair value of our equity instruments or that may be settled by the issuance of our equity instruments. Under the proposed statement, we will recognize compensation cost for share-based compensation issued to or purchased by employees under our stock-based compensation plans using a fair-value-based method effective January 1, 2005. The impact the proposed statement will have on our condensed consolidated financial statements is not known at this time, however, it may reduce net income and earnings per share similarly to the amounts disclosed in note 2 to our condensed consolidated financial statements and note 1 to our consolidated financial statements contained in the Annual Financial Statements and Review of Operations filed as Exhibit 13 to our Form 10-K/A for the year ended December 31, 2003. In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Act) became law. The Act provides for prescription drug benefits to retirees and tax-free federal subsidies to sponsors of certain retiree health-care plans. A final determination has not been made as to whether our plans qualify for the subsidies. Accordingly, any measurements of benefit obligations or costs do not reflect the effects of the Act. In May 2004, the FASB issued Staff Position No. FAS 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003," effective for the third quarter of 2004. We believe the impact of adoption will be immaterial to our results of operations. 17 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS CONSOLIDATED OPERATIONS Net sales grew $137.3 million or 12.7% to $1,221.7 million in the second quarter of 2004 compared to 2003 (including a benefit of $18.6 million due to the net strengthening of foreign currencies mainly in Europe, Middle East and Africa). In the first half of 2004, net sales grew $208.3 million or 10.7% to $2,161.1 million compared to 2003 (including a benefit of $60.5 million due to the net strengthening of foreign currencies). Our revenue growth was mainly attributable to increased Global Applied and Unitary Products Group equipment volume and Global Applied service business (consisting of services, parts and replacement equipment). Revenue growth in the first half of 2004 in Global Applied and Unitary Products Group was partially offset by reduced equipment volume at Bristol Compressors. (See further discussion below under Segment Analysis.) Net sales in the United States increased 8.3% to $550.5 million and international net sales increased 16.5% to $671.2 million in the second quarter of 2004 compared to 2003. In the first half of 2004, net sales in the United States increased 6.2% to $976.4 million and international net sales increased 14.6% to $1,184.7 million compared to 2003. International revenue grew at a faster rate than domestic U.S. net sales due to a shift in volume at Bristol from domestic original equipment manufacturers (OEM) to international customers and stronger exports from our U.S. factories to international projects in the Middle East and Asia. Order backlog increased to $1,312.9 million as of June 30, 2004 as compared to $1,107.7 million as of June 30, 2003. Backlog in Global Applied increased $161.5 million mainly due to projects in the Middle East, United Kingdom, and Asia, as well as longer lead time in commercial marine markets. Unitary Products Group and Bristol backlog increased $43.6 million reflecting changes in ordering patterns of our customers, OEM and market activity levels. As of December 31, 2003, order backlog was $1,026.6 million. Gross profit declined $0.7 million or 0.3% to $225.7 million (18.5% of net sales) in the second quarter of 2004 compared to $226.4 million (20.9% of net sales) in 2003. In the first half of 2004, gross profit increased $10.3 million or 2.7% to $396.7 million (18.4% of net sales) compared to $386.5 million (19.8% of net sales) in 2003. The net strengthening of foreign currencies increased our gross profit $3.2 million and $10.6 million in the second quarter and first half of 2004, respectively. Overall, gross profit improved due to increased equipment volume in Global Applied and Unitary Products Group and realization of restructuring initiative benefits. These improvements were offset by the $20 million warranty charge for the Unitary Products Group furnace inspection and remediation program (see further discussion below under Segment Analysis); margin pricing pressure in EMEA and Asia; and higher raw material (principally steel and copper) and component costs. In the second quarter and first half of 2004, raw material cost increases in excess of selling price increases were $9.6 million and $12.7 million, respectively. Worldwide demand for steel and copper continued to increase our raw material cost and cost of components containing these materials. While we hedge a portion of our copper and aluminum purchases and have contracts for steel purchases, we experienced cost increases for unhedged portions and components containing these commodities, as well as surcharges on our steel purchases. We expect the cost of raw materials and components to remain above 2003 levels for the remainder of 2004 and 2005. In the second quarter and first half of 2003, we recorded inventory write-downs related to strategic actions to rationalize our manufacturing capacity in Global Applied of $1.2 million and $3.1 million, respectively. Selling, general and administrative (SG&A) expenses increased $20.5 million or 13.1% to $177.3 million (14.5% of net sales) in the second quarter of 2004 compared to $156.8 million (14.5% of net sales) in 2003. In the first half of 2004, SG&A expenses increased $37.7 million or 12.3% to $343.5 million (15.9% of net sales) compared to $305.8 million (15.7% of net sales) in 2003. The net strengthening of foreign currencies increased our SG&A expenses $3 million and $10.2 million in the second quarter and first half of 2004, respectively. Higher selling expenses related to equipment volume gains and marketing of new products, as well as the cost of our initiatives to improve our information technology capabilities and develop products contributed to the increase. We expect to benefit from improvement initiatives in 2005 and beyond. In 2003, we initiated actions to further reduce our overall cost structure and support the implementation of our new geographic organization. In addition to cost reductions associated with the consolidation of our former Engineered Systems Group and York Refrigeration Group segments, additional actions include the further reduction of manufacturing capacity, elimination of certain product lines, and exiting of several small, non-core businesses. In the second quarter and first half of 18 2003, we recorded restructuring and other charges of $34.3 million and $52.3 million, respectively, related to these actions, including $1.2 million and $3.1 million, respectively, charged to cost of goods sold. The charges in the second quarter and first half of 2003 included $16.0 million and $31.2 million, respectively, in write-downs of various assets and $18.3 million and $21.1 million, respectively, in accruals for severance and other costs. Our 2003 restructuring initiatives resulted in savings of $9 million and $19 million in the second quarter and first half of 2004, respectively, compared to 2003. As a result of the above factors, income from operations increased $11.9 million or 32.5% to $48.4 million (4% of net sales) in the second quarter of 2004 compared to $36.5 million (3.4% of net sales) in 2003. In the first half of 2004, income from operations grew $21.8 million or 69.1% to $53.2 million (2.5% of net sales) compared to $31.5 million (1.6% of net sales) in 2003. (See further discussion below under Segment Analysis.) Net interest expense declined $2 million or 16.9% to $10.1 million in the second quarter of 2004 compared to 2003. In the first half of 2004, net interest expense decreased $3.2 million or 13.3% to $20.9 million compared to 2003. The decline resulted from lower average borrowing rates. Equity in earnings of affiliates grew $1.8 million or 70.6% to $4.2 million in the second quarter of 2004 compared to 2003. In the first half of 2004, equity in earnings of affiliates increased $1.2 million or 32.4% to $4.7 million compared to 2003. The increase was primarily the result of improved performance of Clima Roca and other affiliates. The income tax provision of $4.1 million and $2.8 million in the second quarter and first half of 2004, respectively, and $7.7 million and $5.3 million in the second quarter and first half of 2003, respectively, relate to both U.S. and non-U.S. operations. The effective tax rates were 9.7% and 28.5% in the second quarter of 2004 and 2003, respectively, and 7.7% and 49% in the first half of 2004 and 2003, respectively. The 2004 income tax provisions were lower than the U.S. statutory rate of 35% primarily due to pretax earnings in non-U.S. jurisdictions where statutory rates are less than 35%; the favorable impact of the settlement of prior years' tax returns (tax benefit of $8.2 million) partially offset by deferred tax adjustments (tax expense of $5.6 million); and a 39.8% tax benefit associated with the $20 million warranty charge for the Unitary Products Group furnace inspection and remediation program. The income tax provision in the second quarter of 2003 was lower than the U.S. statutory rate of 35% mainly due to pre-tax earnings in non-U.S. jurisdictions where statutory rates are less than 35%. The income tax provision in the first half of 2003 was higher than the U.S. statutory rate of 35% due to restructuring charges, for which the tax benefits were recorded at a lower effective tax rate. As a result of the above factors, net income increased $19.2 million to $38.4 million (3.1% of net sales) in the second quarter of 2004 as compared to $19.2 million (1.8% of net sales) in 2003. In the first half of 2004, net income grew $28.6 million to $34.2 million (1.6% of net sales) as compared to $5.6 million (0.3% of net sales) in 2003. 19 SEGMENT ANALYSIS The following table sets forth net sales and income from operations by segment (in thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2004 2003 2004 2003 ------------ ------------ ----------- ----------- Net sales: Global Applied: Americas $ 394,424 $ 362,839 $ 727,223 $ 660,252 Europe, Middle East and Africa 384,403 335,702 682,824 597,754 Asia 163,485 131,987 266,269 222,106 Intragroup sales (59,470) (54,252) (104,461) (94,618) ------------ ------------ ----------- ----------- 882,842 776,276 1,571,855 1,385,494 Unitary Products Group 258,115 222,949 438,506 386,491 Bristol Compressors 138,965 138,837 252,443 276,399 Eliminations (58,214) (53,645) (101,729) (95,610) ------------ ------------ ----------- ----------- Net sales $ 1,221,708 $ 1,084,417 $ 2,161,075 $ 1,952,774 ============ ============ =========== =========== Income from operations: Global Applied: Americas $ 23,313 $ 16,815 $ 24,999 $ 14,059 Europe, Middle East and Africa 14,600 12,451 14,591 13,040 Asia 22,082 22,423 31,656 32,116 ------------ ------------ ----------- ----------- 59,995 51,689 71,246 59,215 Unitary Products Group 30,191 24,049 42,217 32,269 Bristol Compressors 4,242 11,930 8,320 23,259 General corporate expenses, eliminations, and other non-allocated items (46,056) (16,130) (68,536) (30,245) Charges and other expenses -- (35,030) -- (53,016) ------------ ------------ ----------- ----------- Income from operations $ 48,372 $ 36,508 $ 53,247 $ 31,482 ============ ============ =========== ===========
Global Applied Global Applied net sales grew $106.6 million or 13.7% to $882.8 million in the second quarter of 2004 compared to 2003. In the first half of 2004, net sales increased $186.4 million or 13.5% to $1,571.9 million compared to 2003. The net strengthening of global currencies increased net sales by $18.3 million in the second quarter and by $59.2 million in the first half. Americas equipment growth was driven by increased volume of commercial air conditioning, air handling and refrigeration equipment, and improved market conditions in Latin America. EMEA experienced volume increases throughout Europe, mainly for commercial air conditioning equipment, air handling units, and in refrigeration contracting. Asia revenue increased primarily due to China's economic expansion and overall stronger demand for commercial air conditioning equipment in other Asian countries. Service business sales grew $22.1 million or 8.1% to $296.4 million in the second quarter of 2004 compared to 2003. In the first half of 2004, service business revenue increased $50.8 million or 10.2% to $550.7 million compared to 2003. Our service business (consisting of services, parts and replacement equipment) continued to expand as demand for repair and replacement work and multi-site commercial service arrangements remained strong. Global Applied income from operations increased $8.3 million to $60 million (6.8% of net sales) in the second quarter of 2004 compared to $51.7 million (6.7% of net sales) in 2003. In the first half of 2004, income from operations increased $12 million to $71.2 million (4.5% of net sales) compared to $59.2 million (4.3% net sales) in 2003. Equipment volume increases and 2003 restructuring initiative benefits were partially offset by rising raw material and component costs. In addition, EMEA experienced margin-pricing pressure mainly in Europe due to general economic conditions. Improved Asian commercial equipment volume was more than offset by increased material costs and margin-pricing pressure for mini-split product. Unitary Products Group (UPG) UPG net sales grew $35.2 million or 15.8% to $258.1 million in the second quarter of 2004 compared to 2003. In the first half of 2004, net sales grew $52 million or 13.5% to $438.5 million compared to 2003. Residential, light commercial and 20 manufactured housing equipment volume improved due to overall growth in the North American unitary air conditioning and heating market. Overall market share remained relatively flat. Net sales of the new "Affinity" product line continued to increase since market introduction in the first quarter of 2004. General selling price increases enacted in the second quarter of 2004 partially contributed to net sales growth. We expect new product introductions, price increases, and improvements in construction markets to increase net sales for the remainder of 2004 above 2003 levels. UPG income from operations grew $6.1 million or 25.5% to $30.2 million (11.7% of net sales) in the second quarter of 2004 compared to $24 million (10.8% of net sales) in 2003. In the first half of 2004, income from operations increased $9.9 million or 30.8% to $42.2 million (9.6% of net sales) compared to $32.3 million (8.4% of net sales) in 2003. Improved results are mainly attributable to higher equipment volume, production efficiencies, and a favorable product mix partially offset by increased raw material and component costs and advertising expenses. Bristol Compressors (Bristol) Bristol net sales increased $0.1 million or 0.1% to $139 million in the second quarter of 2004 compared to 2003. In the first half of 2004, net sales declined $24 million or 8.7% to $252.4 million compared to 2003. Revenue has declined in the first half due to lower shipments to domestic OEMs mainly as a result of the loss of a customer in the fourth quarter of 2003. Higher shipments to international customers offset reduced domestic volume in the second quarter of 2004 compared to 2003. Shipments to domestic customers in 2004 are expected to remain below 2003 levels. Net sales of the "Benchmark" compressor continued to improve since market introduction in the first quarter of 2004. Bristol income from operations decreased $7.7 million or 64.4% to $4.2 million (3.1% of net sales) in the second quarter of 2004 compared to $11.9 million (8.6% of net sales) in 2003. In the first half of 2004, income from operations declined $14.9 million or 64.2% to $8.3 million (3.3% of net sales) compared to $23.3 million (8.4% of net sales) in 2003. Reduced results are mainly attributable to domestic shipment declines, product mix, and increased raw material and component costs. The successful introduction and market acceptance of the "Benchmark" compressor is expected to improve Bristol's results beyond 2004. Other General corporate expenses, eliminations, and other non-allocated items increased $29.9 million or 185.5% to $46.1 million in the second quarter of 2004 compared to 2003. In the first half of 2004, general corporate expenses, eliminations, and other non-allocated items increased $38.3 million or 126.6% to $68.5 million compared to 2003. The increase was primarily due to the $20 million warranty charge for the UPG furnace inspection and remediation program discussed below; increased costs related to improving our information technology capabilities in both applications and infrastructure of $4.9 million ($9.4 million in the first half of 2004); and increased costs related to other non-allocated items of $5 million ($8.9 million in the first half of 2004). The year-over-year cost increases for information technology investments are expected to continue, to a lesser extent, for the remainder of the year. During the second quarter of 2004, we finalized field and factory testing to investigate failures found in heat exchangers of certain sealed combustion gas furnaces used in the manufactured housing industry. We found that installation and application factors combined with component part variation can result in excessive heat exchanger temperatures, which may contribute to failures in certain furnace models manufactured in the years 1995 to 2000. We no longer produce these furnace models. As a result, we recorded a $20 million warranty charge for the UPG furnace inspection and remediation program during the second quarter of 2004. The $20 million warranty charge represents our best estimate of repair costs within a reasonable estimated range between $13 million and $30 million. Repair cost estimates are mainly comprised of the expected cost of repair kits or new heat exchangers and installation labor. Our estimates are based upon the projected number of furnace units to be serviced (find rate), current repair costs, and the estimated number of furnace units requiring repair. Differences between estimated and actual find rate, costs to manufacture and install repair kits or heat exchangers, and number of furnace units that require repair could have a significant impact on our consolidated results of operations. We expect to begin repairs in the third quarter of 2004 and complete repairs by the end of 2006. 21 Charges and other expenses in 2003 are as follows (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2003 JUNE 30, 2003 ------------------ ---------------- By segment: Global Applied: Americas $ 3,896 $ 7,467 EMEA 22,910 35,255 Asia 696 2,766 ------- ------- 27,502 45,488 Unitary Products Group 7,500 7,500 Bristol Compressors 28 28 ------- ------- $35,030 $53,016 ======= ======= By type: Restructuring and other charges, net $33,060 $49,154 Restructuring and other charges reflected in cost of goods sold 1,218 3,110 Related operating expenses included in cost of goods sold 752 752 ------- ------- $35,030 $53,016 ======= =======
No similar charges were incurred in 2004. LIQUIDITY AND CAPITAL RESOURCES Our significant liquidity and capital funding needs are working capital, operating expenses, capital expenditures, debt repayments, restructuring costs, dividends to our shareholders, contractual obligations, and commercial commitments. Liquidity and capital resource needs are met through cash flows from operations, borrowings under our credit agreements and bank lines of credit, financing of trade receivables, and credit terms from suppliers, which approximate receivable terms to our customers. Additional sources of cash include customer deposits and progress payments. We believe that we will be able to satisfy our principal and interest payment obligations and our working capital and capital expenditure requirements from operating cash flows together with the availability under the uncommitted credit lines and committed bank lines of credit. Uncommitted credit lines and committed bank lines of credit support seasonal working capital needs and are available for general corporate purposes. Since certain of our long-term debt obligations and our revolving trade receivables facility bear interest at floating rates, our interest costs are sensitive to changes in prevailing interest rates. WORKING CAPITAL Our working capital is mainly comprised of inventories, net receivables, and accounts payable and accrued expenses. Working capital increased $122.5 million to $485 million as of June 30, 2004 compared to $362.5 million as of December 31, 2003. The increase resulted from higher net receivables and inventories partially offset by an increase in accounts payable and accrued expenses. Net Receivables Net receivables increased $158.6 million in the first half of 2004 primarily due to overall revenue growth and seasonal demand for UPG and Bristol products, as well as a greater mix of receivables from international customers with longer payment terms at Bristol. Overall, days sales outstanding decreased to 49 days at June 30, 2004 from 50 days at December 31, 2003. Inventories Inventories increased $59.7 million in the first half of 2004 mainly as a result of the seasonal nature of our business. Our inventories increase during the first half of the year as we manufacture inventory to support demand in the second half of the year. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses grew $119.7 million primarily due to an increase in raw material and component purchases; the timing of payment cycles in relation to quarter end; an increase in warranty accruals primarily related to the current portion of the warranty charge for the UPG furnace inspection and remediation program; and increases in accruals for value-added tax, customer deposits and employee compensation and benefits. These increases were partially offset by payment of 2003 incentive compensation and restructuring accruals and net weakening of foreign currencies since December 31, 2003. 22 CASH FLOWS Operating Activities We used $39.2 million of cash for operating activities in the first half of 2004. Net cash flows of $111.3 million were used by the change in assets and liabilities net of effects from acquisitions and divestitures, mainly due to the increases in net receivables, inventory, and accounts payable and accrued expenses, as discussed above. Cash flows of $72.1 million were generated from operations. Our operating cash flows in the first half of 2004 reflect the seasonal nature of our business. During the first half of 2003, our operating activities provided $34.8 million mainly due to lower working capital requirements for net receivables and inventories offset by accounts payable and accrued expenses to support lower sales in the first half of 2003 and backlog as of June 30, 2003. Investing Activities Cash used in investing activities of $36.9 million was mainly comprised of capital expenditures for manufacturing equipment and information technology systems consistent with 2003. Financing Activities Cash provided by financing activities of $77.3 million included proceeds of $78.9 million from net borrowings and $15 million from issuance of common stock partially offset by common stock dividend payments of $16.5 million. Net borrowings are consistent with the typical seasonality of our businesses to finance increasing working capital needs during the first half of the year. Proceeds from issuance of common stock represent cash received from employee stock purchases and exercise of stock options under our employee stock plans. We paid cash dividends of $0.40 per share in the first half of 2004 representing a 33% increase compared to 2003. In 2003, our financing activities used cash of $47.2 million mainly due to net debt repayments as a result of cash provided by operating activities. BORROWINGS AND AVAILABILITY Total indebtedness was $691.5 million as of June 30, 2004, primarily consisting of $500 million of senior notes, $117.2 million outstanding under domestic bank lines, and $41 million of Danish retail notes. The senior notes mature at dates ranging from 2006 to 2012 and carry fixed rates ranging from 5.8% to 6.7%. The Danish retail notes are due in October 2004 and have a coupon rate of 2%. Our ability to issue commercial paper is limited due to our credit ratings. The following table summarizes the terms of our lines of credit (in thousands):
LIMIT AVAILABILITY (a) JUNE 30, DEC. 31, JUNE 30, DEC. 31, BORROWING ANNUAL 2004 2003 2004 2003 EXPIRES RATE (b) FEE -------- -------- -------- -------- --------- --------- ------ Five Year Credit May 29, LIBOR + Agreement $400,000 $400,000 $400,000 $400,000 2006 1.175% 0.2% 364-Day Credit March 11, LIBOR + Agreement (c) 200,000 200,000 200,000 200,000 2005 0.85% 0.15% Domestic Uncom- bank lines 150,000 135,000 32,800 110,000 mitted Various -- Non-U.S bank credit Uncom- facilities 386,100 355,246 251,072 246,298 mitted Various --
(a) Availability is reduced for outstanding borrowings and bank guarantee and letters of credit usage. (b) The one-month LIBOR (London Interbank Offering Rate) rate was 1.37% and 1.12% as of June 30, 2004 and December 31, 2003, respectively. (c) We renewed our 364-Day Credit Agreement in March 2004. The Five Year Credit Agreement and 364-Day Credit Agreement (collectively, the Agreements) contain financial covenants requiring us to maintain certain financial ratios and standard provisions limiting leverage and liens. We were in compliance 23 with these financial covenants as of June 30, 2004 and December 31, 2003. We have access to bank lines of credit and have the ability to borrow under the Agreements as long as we continue to meet the financial covenants or until expiration of these arrangements. The primary financial covenants are the earnings before interest, taxes, depreciation, and amortization (EBITDA) interest coverage and the debt to capital ratio, as defined under the Agreements. As of June 30, 2004, our EBITDA interest coverage was 4.4 times, exceeding the minimum requirement of 3.5 times. As of June 30, 2004, our debt to capital ratio, as defined in the Agreements, was 45%, below the maximum allowed of 50%. We also maintain an annually renewable revolving facility under which we sell certain trade receivables - see "Off-Balance Sheet Arrangements" section below. OFF-BALANCE SHEET ARRANGEMENTS Our off-balance sheet arrangements are comprised of a trade receivable revolving facility and operating leases. Trade Receivable Revolving Facility Pursuant to the terms of an annually renewable revolving facility, we sell certain of our trade receivables to a wholly owned consolidated subsidiary, York Receivables Funding LLC (YRFLLC). In turn, YRFLLC sells, on a revolving basis, an undivided ownership interest in the trade receivables to bank-administered asset-backed commercial paper vehicles. In May 2004, we amended the facility, increasing the availability from $150 million to $200 million. We continue to service sold trade receivables. No servicing asset or liability has been recognized as our cost to service sold trade receivables approximates the servicing income. In accordance with the facility, YRFLLC has sold $150 million of an undivided interest in trade receivables as of June 30, 2004 and December 31, 2003, resulting in a reduction of net receivables reflected in our condensed consolidated balance sheets. The discount rate on trade receivables sold was 1.26% and 1.12% as of June 30, 2004 and December 31, 2003, respectively. The program fee on trade receivables sold was 0.4% and 0.5% as of June 30, 2004 and December 31, 2003, respectively. Operating Leases Operating leases provide us with the flexibility to use property, plant and equipment without assuming ownership and related debt. Operating leases reduce our risk associated with disposal and residual fair value of property, plant and equipment at the end of the lease. OUTLOOK Overall, we expect improved net sales and net income in fiscal year 2004 as compared to 2003. We anticipate equipment growth within Global Applied specifically for commercial air conditioning and refrigeration products as we are seeing some improvements in global economies; increased sales of large commercial equipment in our Asian business; and the benefit of new commercial air conditioning products. We anticipate continued strength in our service businesses' (services, parts, and replacement equipment) sales within Global Applied. We also anticipate growth in our UPG equipment business due to continued strength of U.S. residential housing markets (both new construction and replacement) and our new product introductions. Further savings from our 2003 cost reduction actions are expected to be realized throughout 2004. Overall growth and savings are expected to be partially offset by a decline in Bristol sales; increased costs for copper, steel, and components containing copper and steel net of price increases; and continued investments in new products and information technology projects. PROPOSED ACCOUNTING STANDARDS In March 2004, the Financial Accounting Standards Board issued Proposed Statement of Financial Accounting Standards "Share-Based Payment," an amendment of FASB Statements No. 123 and 95. This proposed statement addresses the accounting for share-based compensation in which we exchange employee services for (a) our equity instruments or (b) liabilities that are based on the fair value of our equity instruments or that may be settled by the issuance of our equity instruments. Under the proposed statement, we will recognize compensation cost for share-based compensation issued to or purchased by employees under our stock-based compensation plans using a fair-value-based method effective January 1, 2005. The impact the proposed statement will have on our condensed consolidated financial statements is not known at this time, however, it may reduce net income and earnings per share similarly to the amounts disclosed in note 2 to our condensed 24 consolidated financial statements and note 1 to our consolidated financial statements contained in the Annual Financial Statements and Review of Operations filed as Exhibit 13 to our Form 10-K/A for the year ended December 31, 2003. In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Act) became law. The Act provides for prescription drug benefits to retirees and tax-free federal subsidies to sponsors of certain retiree health-care plans. A final determination has not been made as to whether our plans qualify for the subsidies. Accordingly, any measurements of benefit obligations or costs do not reflect the effects of the Act. In May 2004, the FASB issued Staff Position No. FAS 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003," effective for the third quarter of 2004. We believe the impact of adoption will be immaterial to our results of operations. FORWARD-LOOKING INFORMATION - RISK FACTORS This document contains statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements" under the securities laws. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These forward-looking statements are intended to provide our current expectations or plans for future operating and financial performance based on assumptions currently believed to be valid. To the extent we have made "forward-looking statements," certain risk factors could cause actual results to differ materially from those anticipated in such forward-looking statements including, but not limited to: - Changes in competition within specific markets or geographies - Introduction of new competitive products - Changes in government regulation, including environmental and tax laws - Legal actions, including pending and unasserted claims - Loss of patented technology - Events that create a negative image for our trademarks - Work stoppages - Price and availability of raw materials and components - Realization of benefits from our cost reduction initiatives - Changes in individual country economics, including but not limited to: Argentina; Brazil; China; Mexico; Saudi Arabia; United Arab Emirates; and Venezuela - Acts of war or terrorism - Changes in commercial and residential construction markets - Significant changes in customer orders - Significant product defects or failures - Failure to successfully implement information technology systems - Unfavorable outcome of our UPG furnace inspection and remediation program including, but not limited to review and approval by the United States Consumer Product Safety Commission and significant changes in assumptions used to estimate our repair costs Unseasonably cool weather in various parts of the world could adversely affect our UPG and Global Applied air conditioning businesses and, similarly, the Bristol compressor business. Bristol and UPG are also impacted by the successful development, introduction, and customer acceptance of new products. The Global Applied air conditioning business could also be affected by a further slowdown in the large chiller market and by the acceptance of new product introductions. Global Applied could be negatively impacted by reductions in commercial construction. Our ability to effectively implement price increases to offset higher costs is dependent on market conditions and the competitive environment. The financial position and financial results of our foreign locations could be negatively impacted by the translation effect of currency fluctuations and by political 25 changes including nationalization or expropriation of assets. In addition, our overall performance could be affected by declining worldwide economic conditions or slowdowns resulting from world events. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information responsive to this item as of December 31, 2003 appears under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operations, Market Risk," on pages 14 to 16 of the Annual Financial Statements and Review of Operations filed as Exhibit 13 to our Form 10-K/A for the year ended December 31, 2003. There was no material change in such information as of June 30, 2004. ITEM 4. CONTROLS AND PROCEDURES As of June 30, 2004, we carried out an evaluation, under the supervision and with the participation of company management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 26 PART II - OTHER INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES ITEM 1. LEGAL PROCEEDINGS Not Applicable ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS The following table provides information about purchases of registered equity securities by the Company during the quarter ended June 30, 2004:
TOTAL NUMBER OF SHARES PURCHASED MAXIMUM NUMBER OF TOTAL NUMBER AVERAGE AS PART OF PUBLICLY SHARES THAT MAY YET BE OF SHARES PRICE PAID ANNOUNCED PLANS PURCHASED UNDER THE PERIOD PURCHASED PER SHARE OR PROGRAMS (2) PLANS OR PROGRAMS (2) - ---------------- ------------ ---------- ------------------- ---------------------- April 1, 2004 - April 30, 2004 1,723 (1) $42.95 (1) -- -- May 1, 2004 - May 31, 2004 -- -- -- -- June 1, 2004 - June 30, 2004 -- -- -- --
(1) Not purchased through a publicly announced plan or program. An affiliated purchaser delivered back to the issuer shares of stock already issued to him in payment of the exercise price of stock options. (2) The Company has no publicly announced repurchase plans or programs. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) Our annual meeting of Stockholders was held on May 20, 2004. (b) Proxies were solicited for the meeting. All nominees for Director were elected and items (c) 2 through 5 (see below) were approved. 27 (c) The following votes were cast at the Annual Meeting for the matters indicated below: 1. Election of Directors Votes For Votes Withheld Gerald C. McDonough 35,817,581 1,545,036 C. David Myers 36,072,238 1,290,379 W. Michael Clevy 34,168,207 3,194,410 J. Roderick Heller, III 34,245,947 3,116,670 Robert F. B. Logan 35,725,555 1,637,062 Paul J. Powers 34,317,450 3,045,167 Donald M. Roberts 35,652,414 1,710,203 James A. Urry 35,725,094 1,637,523 2. Proposal to approve an amendment Votes For Votes Against Abstentions to our Employee Stock Purchase Plan 34,610,157 445,933 24,055 3. Proposal to approve an amendment Votes For Votes Against Abstentions to our Incentive Compensation Plan 26,050,393 8,989,626 40,126 4. Proposal to approve an amendment Votes For Votes Against Abstentions to our Omnibus Stock Plan 32,015,015 3,039,397 25,733 5. The appointment of KPMG LLP Votes For Votes Against Abstentions as independent auditors 36,658,339 689,241 15,037
ITEM 5. OTHER INFORMATION Not Applicable ITEM 6. EXHIBITS (a) Exhibits Exhibit 4.1 - Amended and restated Receivables Purchase Agreement dated as of May 17, 2004 among York Receivables Funding LLC, as seller, York International Corporation, as initial servicer, Gotham Funding Corporation, as a conduit purchaser, The Bank of Tokyo-Mitsubishi, LTD., New York Branch, as agent for the Gotham Purchaser Group, Liberty Street Funding Corp., as a conduit purchaser, The Bank of Nova Scotia, as agent for the Liberty Street Purchaser Group, and The Bank of Tokyo-Mitsubishi, LTD., New York Branch as administrator* Exhibit 10.1 - York International Corporation Amended and Restated 2002 Incentive Compensation Plan* Exhibit 10.2 - York International Corporation Amended and Restated 2002 Omnibus Stock Plan* Exhibit 31.1 - Certification of the Chief Executive Officer of York International Corporation pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* Exhibit 31.2 - Certification of the Chief Financial Officer of York International Corporation pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* Exhibit 32.1 - Certification of the Chief Executive Officer and Chief Financial Officer of York International Corporation pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* * Submitted electronically herewith (b) Reports on Form 8-K 28 Current Report on Form 8-K dated April 22, 2004, containing a press release, dated April 22, 2004, setting forth our first quarter 2004 results (such press release is not incorporated by reference herein or deemed "filed" within the meaning of Section 18 of the Securities Act of 1933) Current Report on Form 8-K dated May 4, 2004, containing a press release, dated May 3, 2004, announcing the resignation of the Vice President and President, York Asia Pacific Current Report on Form 8-K dated May 4, 2004, containing a press release, dated May 4, 2004, commenting on our 2004 expected financial results (such press release is not incorporated by reference herein or deemed "filed" within the meaning of Section 18 of the Securities Act of 1933) 29 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized. YORK INTERNATIONAL CORPORATION ------------------------------ Registrant Date August 4, 2004 /S/ M. David Kornblatt ------------------------------ M. David Kornblatt Vice President and Chief Financial Officer 30 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ----------- 4.1 Amended and restated Receivables Purchase Agreement dated as of May 17, 2004 among York Receivables Funding LLC, as seller, York International Corporation, as initial servicer, Gotham Funding Corporation, as a conduit purchaser, The Bank of Tokyo-Mitsubishi, LTD., New York Branch, as agent for the Gotham Purchaser Group, Liberty Street Funding Corp., as a conduit purchaser, The Bank of Nova Scotia, as agent for the Liberty Street Purchaser Group, and The Bank of Tokyo-Mitsubishi, LTD., New York Branch as administrator* 10.1 York International Corporation Amended and Restated 2002 Incentive Compensation Plan* 10.2 York International Corporation Amended and Restated 2002 Omnibus Stock Plan* 31.1 Certification of the Chief Executive Officer of York International Corporation pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 31.2 Certification of the Chief Financial Officer of York International Corporation pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 32.1 Certification of the Chief Executive Officer and Chief Financial Officer of York International Corporation pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* * Submitted electronically herewith
31 EX-4.1 2 w99481exv4w1.txt AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT EXHIBIT 4.1 EXECUTION VERSION ================================================================================ AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT dated as of May 17, 2004 among YORK RECEIVABLES FUNDING LLC, YORK INTERNATIONAL CORPORATION, as Servicer THE MEMBERS OF VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY HERETO and THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH, as Administrator ================================================================================ TABLE OF CONTENTS
PAGE ARTICLE I AMOUNTS AND TERMS OF THE PURCHASES................................. 2 Section 1.1. Purchase Facility........................................... 2 Section 1.2. Making Purchases............................................ 2 Section 1.3. Purchased Interest Computation.............................. 5 Section 1.4. Settlement Procedures....................................... 5 Section 1.5. Fees........................................................ 9 Section 1.6. Payments and Computations, Etc.............................. 10 Section 1.7. Increased Costs............................................. 10 Section 1.8. Requirements of Law......................................... 11 Section 1.9. Inability to Determine Euro-Rate............................ 12 Section 1.10. Extension of Termination Date............................... 13 ARTICLE II REPRESENTATIONS AND WARRANTIES; COVENANTS; TERMINATION EVENTS...... 14 Section 2.1. Representations and Warranties; Covenants................... 14 Section 2.2. Termination Events.......................................... 14 ARTICLE III INDEMNIFICATION.................................................... 14 Section 3.1. Indemnities by the Seller................................... 14 Section 3.2. Indemnities by the Servicer................................. 16 Section 3.3. Funding Plan; Funding Losses................................ 16 ARTICLE IV ADMINISTRATION AND COLLECTIONS..................................... 17 Section 4.1. Appointment of the Servicer................................. 17 Section 4.2. Duties of the Servicer...................................... 18 Section 4.3. Lock-Box Account Arrangements............................... 19 Section 4.4. Enforcement Rights.......................................... 20 Section 4.5. Responsibilities of the Seller.............................. 21 Section 4.6. Servicing Fee............................................... 21 ARTICLE V THE AGENTS......................................................... 22 Section 5.1. Appointment and Authorization............................... 22 Section 5.2. Delegation of Duties........................................ 23 Section 5.3. Exculpatory Provisions...................................... 23 Section 5.4. Reliance by Agents.......................................... 23
-i- TABLE OF CONTENTS (continude)
PAGE Section 5.5. Notice of Termination Events............................................ 24 Section 5.6. Non-Reliance on Administrator, Purchaser Agents and Other Purchasers.... 24 Section 5.7. Administrators and Affiliates........................................... 25 Section 5.8. Indemnification......................................................... 25 Section 5.9. Successor Administrator................................................. 26 ARTICLE VI MISCELLANEOUS.................................................................. 26 Section 6.1. Amendments, Etc......................................................... 26 Section 6.2. Notices, Etc............................................................ 26 Section 6.3. Successors and Assigns; Participations; Assignments..................... 27 Section 6.4. Costs, Expenses and Taxes............................................... 29 Section 6.5. No Proceedings; Limitation on Payments.................................. 29 Section 6.6. GOVERNING LAW AND JURISDICTION.......................................... 30 Section 6.7. Execution in Counterparts............................................... 30 Section 6.8. Survival of Termination................................................. 31 Section 6.9. WAIVER OF JURY TRIAL.................................................... 31 Section 6.10. Sharing of Recoveries................................................... 31 Section 6.11. Right of Setoff......................................................... 31 Section 6.12. Entire Agreement........................................................ 31 Section 6.13. Headings................................................................ 31 Section 6.14. Purchaser Groups' Liabilities........................................... 32 Section 6.15. Confidentiality......................................................... 32
EXHIBIT I Definitions EXHIBIT II Conditions of Purchases EXHIBIT III Representations and Warranties EXHIBIT IV Covenants EXHIBIT V Termination Events EXHIBIT VI Supplemental Perfection Representations, Warranties and Covenants SCHEDULE I Credit and Collection Policy SCHEDULE II Lock-Box Banks and Lock-Box Accounts SCHEDULE III Trade Names -ii- ANNEX A Initial Information Package ANNEX B Form of Purchase Notice ANNEX C Form of Assumption Agreement ANNEX D Form of Transfer Supplement ANNEX E Form of Paydown Notice ANNEX F List of Eligible Foreign Obligor Countries This AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (as amended, amended and restated, supplemented or otherwise modified from time to time, this "Agreement") is entered into as of May 17, 2004, among YORK RECEIVABLES FUNDING LLC, a Delaware limited liability company, as seller (the "Seller"), YORK INTERNATIONAL CORPORATION, a Delaware corporation ("York"), as initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the "Servicer"), GOTHAM FUNDING CORPORATION ("Gotham"), a Delaware corporation, as a Conduit Purchaser, THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH, ("BTMNY"), as agent for the Gotham Purchaser Group, LIBERTY STREET FUNDING CORP. ("Liberty Street"), a Delaware corporation, as a Conduit Purchaser, THE BANK OF NOVA SCOTIA ("BNS"), a Canadian chartered bank acting through its New York Agency, as agent for the Liberty Street Purchaser Group, each of the other members of each Purchaser Group that become parties hereto by executing an Assumption Agreement or a Transfer Supplement and BTMNY as administrator for each Purchaser Group a party hereto or that become parties hereto (in such capacity, the "Administrator"). PRELIMINARY STATEMENTS. Certain terms that are capitalized and used throughout this Agreement are defined in Exhibit I. References in the Exhibits hereto to the "Agreement" refer to this Agreement, as amended, amended and restated supplemented or otherwise modified from time to time. The Seller desires to sell, transfer and assign an undivided variable percentage interest in a pool of receivables, and the Purchasers desire to acquire such undivided variable percentage interest, as such percentage interest shall be adjusted from time to time based upon, in part, reinvestment payments that are made by such Purchasers. This Agreement amends and restates in its entirety, as of the Closing Date, the Receivables Purchase Agreement, dated as of December 21, 2001 (as amended, amended and restated, supplemented or otherwise modified prior to the date hereof, the "Original Agreement"), among the Seller, the Servicer, the members of the various purchaser groups from time to time party thereto and PNC Bank, National Association, as administrator. Upon the effectiveness of this Agreement, the terms and provisions of the Original Agreement shall, subject to this paragraph, be superseded hereby in their entirety. Notwithstanding the amendment and restatement of the Original Agreement by this Agreement, (i) the Seller and York shall continue to be liable to any Indemnified Party or Affected Person (as such terms are defined in the Original Agreement) with respect to all unpaid Investment, Discount (as such terms are defined in the Original Agreement) and fees and expenses (collectively, the "Original Agreement Outstanding Amounts") under the Original Agreement (which shall continue to accrue thereunder until such amounts are paid in full) and all agreements to indemnify such parties in connection with events or conditions arising or existing prior to the effective date of this Agreement and (ii) the security interest created under the Original Agreement shall remain in full force and effect as security for such Original Agreement Outstanding Amounts until such Original Agreement Outstanding Amounts shall have been paid in full. Upon the effectiveness of this Agreement, each reference to the Original Agreement in any other document, instrument or agreement shall mean and be a reference to this Agreement. Nothing contained herein, unless expressly herein stated to the contrary, is intended to amend, modify or otherwise affect any other instrument, document or agreement executed and or delivered in connection with the Original Agreement. In consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree as follows: ARTICLE I AMOUNTS AND TERMS OF THE PURCHASES Section 1.1.Purchase Facility. (a) On the terms and subject to the conditions hereof, the Seller may, from time to time before the Facility Termination Date, request that the Conduit Purchasers, or, only if a Conduit Purchaser denies such request or is unable to fund (and provides notice of such denial or inability to the Seller, the Administrator and its Purchaser Agent), ratably request that the Related Committed Purchasers, make purchases of and reinvestments in undivided percentage ownership interests with regard to the Purchased Interest from the Seller from time to time from the date hereof to the Facility Termination Date, but solely in the case of purchases (and not reinvestments), subject to the related Funding Plan. Subject to Section 1.4(b), concerning reinvestments, at no time will a Conduit Purchaser have any obligation to make a purchase. Each Related Committed Purchaser severally hereby agrees, on the terms and subject to the conditions hereof, to make Purchases before the Facility Termination Date, based on the applicable Purchaser Group's Ratable Share of each purchase requested pursuant to Section 1.2(a) (each a "Purchase") (and, in the case of each Related Committed Purchaser, its Commitment Percentage of its Purchaser Group's Ratable Share of such Purchase) to the extent its Investment would not thereby exceed its Commitment and the Aggregate Investment would not (after giving effect to all Purchases on such date) exceed the Purchase Limit. (b) The Seller may, upon at least 60 days' written notice to the Administrator and each Purchaser Agent terminate the purchase facility provided for in this Section 1.1(b) in whole or, upon 30 days' written notice to the Administrator and each Purchaser Agent, from time to time, irrevocably reduce in part the unfunded portion of the Purchase Limit (but not below the amount which would cause the Group Investment of any Purchaser Group to exceed its Group Commitment (after giving effect to such reduction)); provided that each partial reduction shall be in the amount of at least $5,000,000, or an integral multiple of $1,000,000 in excess thereof and unless terminated in whole, the Purchase Limit shall in no event be reduced below $50,000,000. Such reduction shall at the option of the Seller be applied either (i) ratably to reduce the Group Commitment of each Purchaser Group or (ii) to terminate the Group Commitment of any one Purchaser Group. Section 1.2. Making Purchases. (a) Each purchase (but not reinvestment) of undivided percentage ownership interests with regard to the Purchased Interest hereunder shall be made upon the Seller's irrevocable written notice in the form of Annex B hereto delivered to the Administrator 2 and each Purchaser Agent in accordance with Section 6.2 (which notice must be received by the Administrator and each Purchaser Agent before 11:00 a.m., New York City time) at least three Business Days before the requested Purchase Date, which notice shall specify: (A) the amount requested to be paid to the Seller (such amount, which shall not be less than $1,000,000, with respect to each Purchaser Group, being the aggregate of the Investments of each Purchaser within such Purchaser Group, relating to the undivided percentage ownership interest then being purchased), (B) the date of such purchase (which shall be a Business Day), and (C) a pro forma calculation of the Purchased Interest after giving effect to the increase in the Aggregate Investment. If the Purchase is requested from a Conduit Purchaser and such Conduit Purchaser determines, in its sole discretion, to make the requested Purchase, such Conduit Purchaser shall transfer to the account of the Seller described in Section 1.2(b), below (the "Disbursement Account"), an amount equal to such Conduit Purchaser's Purchaser Group Ratable Share of such Purchase on the requested Purchase Date. If the Purchase is requested from the Related Committed Purchasers for a Purchaser Group (in the case where the related Conduit Purchaser determined not to or was unable to make such Purchase), subject to the terms and conditions hereof, such Related Committed Purchasers for a Purchaser Group shall transfer the applicable Purchaser Group's Ratable Share of each Purchase (and, in the case of each Related Committed Purchaser, its Commitment Percentage of its Purchaser Group's Ratable Share of such Purchase) into the Disbursement Account on the Purchase Date and shall use its reasonable best efforts to make such transfer by no later than 4:00 p.m. (New York time) on such Purchase Date. (b) On the date of each Purchase, each Purchaser (or the related Purchaser Agent on its behalf), shall make available to the Seller in same day funds, at, Wilmington Trust, account number 57038-0, ABA 031100092, an amount equal to the proceeds of such Purchase. (c) Effective on the date of each Purchase pursuant to this Section 1.2 and each reinvestment pursuant to Section 1.4, the Seller hereby sells and assigns to the Administrator for the benefit of the Purchasers (ratably, according to each such Purchaser's Investment) an undivided percentage ownership interest in: (i) each Pool Receivable then existing, (ii) all Related Security with respect to such Pool Receivables, and (iii) all Collections with respect to, and other proceeds of, such Pool Receivables and Related Security. (d) To secure all of the Seller's obligations (monetary or otherwise) under this Agreement and the other Transaction Documents to which it is a party, whether now or hereafter existing or arising, due or to become due, direct or indirect, absolute or contingent, the Seller hereby grants to the Administrator, for the benefit of the Purchasers, a security interest in all of the Seller's right, title and interest (including any undivided interest of the Seller) in, to and under all of the following, whether now or hereafter owned, existing or arising: (i) all Pool Receivables, (ii) all Related Security with respect to such Pool Receivables, (iii) all Collections with respect to such Pool Receivables, (iv) the Lock-Box Accounts (and the related lock-boxes) and all amounts on deposit therein, and all certificates and instruments, if any, from time to time evidencing such Lock-Box Accounts (and such related lock-boxes) and amounts on deposit therein, 3 (v) all books and records of each Receivable, all rights, remedies, powers and privileges of the Seller in any accounts into which Collections are or may be received and all rights (but none of the obligations) of the Seller under the Purchase and Sale Agreement and (vi) all proceeds and products of, and all amounts received or receivable under any or all of, the foregoing (collectively, the "Pool Assets"). The Administrator, for the benefit of the Purchasers, shall have, with respect to the Pool Assets, and in addition to all the other rights and remedies available to the Administrator and the Purchasers, all the rights and remedies of a secured party under any applicable UCC. (e) The Seller may, with the written consent of the Administrator and each Purchaser, add additional Persons as Purchasers (either to an existing Purchaser Group or by creating new Purchaser Groups) or cause an existing Purchaser to increase its Commitment in connection with a corresponding increase in the Purchase Limit; provided, however, that the Commitment of any Purchaser may only be increased with the consent of such Purchaser. Each new Purchaser (or Purchaser Group) and each Purchaser increasing its Commitment shall become a party hereto or increase its Commitment, as the case may be, by executing and delivering to the Administrator and the Seller an Assumption Agreement in the form of Annex C hereto (which Assumption Agreement shall, in the case of any new Purchaser or Purchasers be executed by each Person in such new Purchaser's Purchaser Group). (f) Each Related Committed Purchaser's obligation hereunder shall be several, such that the failure of any Related Committed Purchaser to make a payment in connection with any purchase hereunder shall not relieve any other Related Committed Purchaser of its obligation hereunder to make payment for any Purchase. Further, in the event any Related Committed Purchaser fails to satisfy its obligation to make a purchase as required hereunder, upon receipt of notice of such failure from the Administrator (or any relevant Purchaser Agent), subject to the limitations set forth herein, the non-defaulting Related Committed Purchasers in such defaulting Related Committed Purchaser's Purchaser Group shall purchase the defaulting Related Committed Purchaser's Commitment Percentage of the related Purchase pro rata in proportion to their relative Commitment Percentages (determined without regard to the Commitment Percentage of the defaulting Related Committed Purchaser; it being understood that a defaulting Related Committed Purchaser's Commitment Percentage of any Purchase shall be first put to the Related Committed Purchasers in such defaulting Related Committed Purchaser's Purchaser Group and thereafter if there are no other Related Committed Purchasers in such Purchaser Group or if such other Related Committed Purchasers are also defaulting Related Committed Purchasers, then such defaulting Related Committed Purchaser's Commitment Percentage of such Purchase shall be put to each other Purchaser Group ratably and applied in accordance with this paragraph (f)). Notwithstanding anything in this paragraph (f) to the contrary, no Related Committed Purchaser shall be required to make a Purchase pursuant to this paragraph for an amount which would cause (i) the aggregate Investment of such Related Committed Purchaser (after giving effect to such Purchase) to exceed its Commitment or (ii) the sum of the aggregate Investments of all Purchasers in the Purchaser Group of such Related Committed Purchaser (after giving effect to such Purchase) to exceed the sum of the Commitments of all of the Purchasers in such Purchaser Group. 4 Section 1.3. Purchased Interest Computation. The Purchased Interest shall be initially computed on the date of the initial Purchase hereunder. Thereafter, until the Facility Termination Date, such Purchased Interest shall be automatically recomputed (or deemed to be recomputed) on each Business Day other than a Termination Day. From and after the occurrence of any Termination Day, the Purchased Interest shall (until the event(s) giving rise to such Termination Day are satisfied or are waived by the Administrator and a Simple Majority of the Purchasers) be deemed to be 100%. The Purchased Interest shall become zero when the Aggregate Investment thereof and Aggregate Discount thereon shall have been paid in full, all the amounts owed by the Seller and the Servicer hereunder to each Purchaser, the Administrator and any other Indemnified Party or Affected Person are paid in full, and the Servicer shall have received the accrued Servicing Fee thereon. Section 1.4. Settlement Procedures. (a) The collection of the Pool Receivables shall be administered by the Servicer in accordance with this Agreement. The Seller shall provide to the Servicer on a timely basis all information needed for such administration, including notice of the occurrence of any Termination Day and current computations of the Purchased Interest. (b) The Servicer shall, on each day on which Collections of Pool Receivables are received (or deemed received) by the Seller or the Servicer: (i) set aside and hold in trust (and shall, at the request of the Administrator (with the consent or at the direction of the Majority Purchasers), segregate in a separate account approved by the Administrator if, at the time of such request, there exists an Unmatured Termination Event or a Termination Event or if the failure to so segregate reasonably could be expected to cause a Material Adverse Effect) for the benefit of each Purchaser Group, out of the Purchasers' Share of such Collections, first, an amount equal to the Aggregate Discount accrued through such day for each Portion of Investment and not previously set aside, second, an amount equal to the fees set forth in each Purchaser Group Fee Letter accrued and unpaid through such day, and third, to the extent funds are available therefor, an amount equal to the aggregate of each Purchaser Group's Ratable Share of the Purchasers' Share of the Servicing Fee accrued through such day and not previously set aside, (ii) subject to Section 1.4(f), if such day is not a Termination Day, remit to the Seller, ratably, on behalf of each Purchaser Group, the remainder of the Purchasers' Share of such Collections. Such remainder shall, to the extent representing a return on the Aggregate Investment, ratably, according to each Purchaser's Investment, be automatically reinvested in Pool Receivables, and in the Related Security, Collections and other proceeds with respect thereto; provided, however, that if the Purchased Interest would exceed 100%, then the Servicer shall not reinvest, but shall set aside and hold in trust for the benefit of the Purchasers (and shall, at the request of the Administrator (with the consent or at the direction of the Majority Purchasers), segregate in a separate account approved by the Administrator if, at the time of such request, there exists an 5 Unmatured Termination Event or a Termination Event or if the failure to so segregate reasonably could be expected to cause a Material Adverse Effect) a portion of such Collections that, together with the other Collections set aside pursuant to this paragraph, shall equal the amount necessary to reduce the Purchased Interest to 100%; provided, further, that in the case of any Purchaser that has provided notice (an "Exiting Notice") to its Purchaser Agent of its refusal, pursuant to Section 1.10, to extend its Commitment hereunder (an "Exiting Purchaser"), then such Purchaser's ratable share of such Collections based on its Investment shall not be reinvested and shall instead be held in trust for the benefit of such Purchaser and applied in accordance with clause (iii) below, (iii) if such day is a Termination Day (or any day following the provision of an Exiting Notice), set aside, segregate and hold in trust (and shall, at the request of the Administrator (with the consent or at the direction of a Simple Majority of the Purchasers), segregate in a separate account approved by the Administrator) for the benefit of each Purchaser Group the entire remainder of the Purchasers' Share of the Collections (or in the case of an Exiting Purchaser an amount equal to such Exiting Purchaser's ratable share of such Collections based on its Investment; provided, that solely for the purpose of determining such Exiting Purchaser's ratable share of such Collections applicable to its Investment (and not for purposes of calculating any Fees or Discount payable to such Exiting Purchaser hereunder), such Exiting Purchaser's Investment shall be deemed to remain constant from the date of the provision of an Exiting Notice until the date such Exiting Purchaser's Investment has been paid in full; it being understood that if such day is also a Termination Day, such Exiting Purchaser's Investment shall be recalculated taking into account amounts received by such Purchaser in respect of this parenthetical and thereafter Collections shall be set aside for such Exiting Purchaser ratably in respect of its Investment (as recalculated)); provided, that if amounts are set aside and held in trust on any Termination Day of the type described in clause (a) of the definition of "Termination Day" (or any day following the provision of an Exiting Notice) and, thereafter, the conditions set forth in Section 2 of Exhibit II are satisfied or waived by the Administrator and a Simple Majority of the Purchasers (or in the case of an Exiting Notice, such Exiting Notice has been revoked by the related Exiting Purchaser, and written notice thereof has been provided to the Administrator, the related Purchaser Agent and the Servicer), such previously set-aside amounts shall, to the extent representing a return on Aggregate Investment (or the Investment of the Exiting Purchaser) and ratably in accordance with each Purchaser's Investment, be reinvested in accordance with clause (ii) on the day of such subsequent satisfaction or waiver of conditions or revocation of Exiting Notice, and (iv) release to the Seller (subject to Section 1.4(f)) for its own account any Collections in excess of: (x) amounts required to be reinvested in accordance with clause (ii) or the proviso to clause (iii) plus (y) the amounts that are required to be set aside pursuant to clause (i), the proviso to clause (ii) and clause (iii) plus (z) the Seller's Share of the Servicing Fee accrued and unpaid through such day 6 and all reasonable and appropriate out-of-pocket costs and expenses of the Servicer for servicing, collecting and administering the Pool Receivables. (c) The Servicer shall, in accordance with the priorities set forth in Section 1.4(d), below, deposit into each applicable Purchaser's account (or such other account designated by such applicable Purchaser or its Purchaser Agent), on each Settlement Date (or solely with respect to Collections held for the Purchasers pursuant to clause (f)(iii) of Section 1.4 such other date approved by the Administrator with at least (5) Business Days prior written notice to the Administrator of such payment), Collections held for each Purchaser with respect to such Purchaser's Portion(s) of Investment pursuant to clause (b)(i) or (f) plus the amount of Collections then held for such Purchaser pursuant to clauses (b)(ii) and (iii) of Section 1.4; provided, York may retain the portion of the Collections set aside pursuant to clause (b)(i) that represents the aggregate of each Purchaser Group's Ratable Share of the Purchasers' Share of the Servicing Fee. On or before the last day of each Yield Period with respect to any Portion of Investment, the applicable Purchaser Agent will notify the Servicer by facsimile of the amount of the Discount accrued with respect to each such Portion of Investment during the related Yield Period then ending. (d) The Servicer shall distribute the amounts described (and at the times set forth) in Section 1.4(c), as follows: (i) if such distribution occurs on a day that is not a Termination Day and the Purchased Interest does not exceed 100%, first to each Purchaser Agent ratably according to the Discount accrued during such Yield Period (for the benefit of the relevant Purchasers within such Purchaser Agent's Purchaser Group) in payment in full of all accrued Discount and fees (other than Servicing Fees) with respect to each Portion of Investment maintained by such Purchasers; it being understood that each Purchaser Agent shall distribute such amounts to the Purchasers within its Purchaser Group ratably according to Discount, and second, if the Servicer has set aside amounts in respect of the Servicing Fee pursuant to clause (b)(i) and has not retained such amounts pursuant to clause (c), to the Servicer's own account (payable in arrears on each Settlement Date) in payment in full of the aggregate of each Purchaser Group's Ratable Share of the Purchasers' Share of accrued Servicing Fees so set aside, and (ii) if such distribution occurs on a Termination Day or on a day when the Purchased Interest exceeds 100%, first to the Servicer's own account in payment in full of all accrued Servicing Fees, second to each Purchaser Agent ratably according to Discount (for the benefit of the relevant Purchasers within such Purchaser Agent's Purchaser Group) in payment in full of all accrued Discount with respect to each Portion of Investment funded or maintained by the Purchasers within such Purchaser Agent's Purchaser Group, third to each Purchaser Agent ratably according to the Group Investment of such Purchaser Agent's Purchaser Group (for the benefit of the relevant Purchasers within such Purchaser Agent's Purchaser Group) in payment in full of each Purchaser's Investment (or, if such day is not a Termination Day, the amount necessary to 7 reduce the Purchased Interest to 100%); it being understood that each Purchaser Agent shall distribute the amounts described in the first and second clauses of this Section 1.4(d)(ii) to the Purchasers within its Purchaser Group ratably according to Discount and Investment, respectively and fourth, if the Aggregate Investment and accrued Aggregate Discount with respect to each Portion of Investment for all Purchaser Groups have been reduced to zero, and all accrued Servicing Fees payable to the Servicer have been paid in full, to each Purchaser Group ratably (for the benefit of the Purchasers within such Purchaser Group) in accordance with its Ratable Share, the Administrator and any other Indemnified Party or Affected Person in payment in full of any other amounts owed thereto by the Seller or Servicer hereunder. After the Aggregate Investment, Aggregate Discount, fees payable pursuant to each Purchaser Group Fee Letter and Servicing Fees with respect to the Purchased Interest, and any other amounts payable by the Seller and the Servicer to each Purchaser Group, the Administrator or any other Indemnified Party or Affected Person hereunder, have been paid in full, all additional Collections with respect to the Purchased Interest shall be paid to the Seller for its own account. (e) For the purposes of this Section 1.4: (i) if on any day the Outstanding Balance of any Pool Receivable is reduced or adjusted as a result of any defective, rejected, returned, repossessed or foreclosed goods or services, or any revision, cancellation, allowance, discount or other adjustment made by the Seller or any Affiliate of the Seller, or the Servicer or any Affiliate of the Servicer, or any setoff or dispute between the Seller or any Affiliate of the Seller, or the Servicer or any Affiliate of the Servicer and an Obligor, the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in the amount of such reduction or adjustment; (ii) if on any day any of the representations or warranties in Section 1(g) or (n) of Exhibit III is not true with respect to any Pool Receivable, the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in full; (iii) except as provided in clause (i) or (ii), or as otherwise required by applicable law or the relevant Contract, all Collections received from an Obligor of any Receivable shall be applied to the Receivables of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable, unless such Obligor designates in writing its payment for application to specific Receivables; and (iv) if and to the extent the Administrator, any Purchaser Agent or any Purchaser shall be required for any reason to pay over to an Obligor (or any trustee, receiver, custodian or similar official in any Insolvency Proceeding) any amount received by it hereunder, such amount shall be deemed not to have been so received by such Person but rather to have been retained by the Seller and, accordingly, such Person shall have a claim against the Seller for such amount, 8 payable when and to the extent that any distribution from or on behalf of such Obligor is made in respect thereof. (f) If at any time the Seller shall wish to cause the reduction of Aggregate Investment (but not to commence the liquidation, or reduction to zero, of the entire Aggregate Investment), the Seller may do so as follows, but subject to the related Funding Plan for the applicable calendar month: (i) the Seller shall give the Administrator, each Purchaser Agent and the Servicer written notice in the form of Annex E hereto (A) at least two Business Days' prior written notice thereof for any reduction of Aggregate Investment less than or equal to $10,000,000 and (B) at least three Business Days' prior written notice thereof for any reduction of Aggregate Investment greater than $10,000,000 (in each case such notice shall include the amount of such proposed reduction and the proposed date on which such reduction will commence); (ii) on the proposed date of commencement of such reduction and on each day thereafter, the Servicer shall cause Collections not to be reinvested until the amount thereof not so reinvested shall equal the desired amount of reduction; and (iii) the Servicer shall hold such Collections in trust for the benefit of each Purchaser ratably according to its Investment, for payment to each such Purchaser (or its related Purchaser Agent for the benefit of such Purchaser) on the (i) next Settlement Date with respect to any Portions of Investment maintained by such Purchaser immediately following the related current Yield Period or (ii) such other date approved by the Administrator with at least five Business Days prior written notice to the Administrator of such payment, and the Aggregate Investment (together with the Investment of any related Purchaser) shall be deemed reduced in the amount to be paid to such Purchaser (or its related Purchaser Agent for the benefit of such Purchaser) only when in fact finally so paid; provided, that: (A) the amount of any such reduction shall be not less than $1,000,000 for each Purchaser Group and shall be an integral multiple of $100,000, and the entire Aggregate Investment after giving effect to such reduction shall be not less than $50,000,000 and shall be in an integral multiple of $100,000 (unless the Aggregate Investment shall have been reduced to zero); and (B) with respect to any Portion of Investment, the Seller shall choose a reduction amount, and the date of commencement thereof, so that to the extent practicable such reduction shall commence and conclude in the same Yield Period. Section 1.5. Fees. The Seller shall pay to each Purchaser Agent for the benefit of the related Purchasers certain fees in the amounts and on the dates set forth in letters, dated the date 9 hereof (or dated the date any such Purchaser Agent and the related Purchaser Group become a party hereto pursuant to an Assumption Agreement, a Transfer Supplement or otherwise), each such letter (as amended, amended and restated, supplemented, or otherwise modified from time to time, a "Purchaser Group Fee Letter") in each case among the Seller, the Servicer, the related Purchasers and the related Purchaser Agent. Section 1.6. Payments and Computations, Etc. (a) All amounts to be paid or deposited by the Seller or the Servicer hereunder shall be made without reduction for offset or counterclaim and shall be paid or deposited no later than 2:00 p.m. (New York City time) on the day when due in same day funds to the applicable Purchaser's account (as such account is identified in the related Purchaser Group Fee Letter). All amounts received after 2:00 p.m. (New York City time) will be deemed to have been received on the next Business Day. (b) The Seller or the Servicer, as the case may be, shall, to the extent permitted by law, pay interest on any amount not paid or deposited by the Seller or the Servicer, as the case may be, when due hereunder, at an interest rate equal to the Base Rate, payable on demand. (c) All computations of interest under clause (b) and all computations of Discount, fees and other amounts hereunder shall be made on the basis of a year of 360 (or 365 or 366, as applicable, with respect to Discount or other amounts calculated by reference to the Base Rate) days for the actual number of days elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next Business Day and such extension of time shall be included in the computation of such payment or deposit. Section 1.7. Increased Costs. (a) If any Purchaser Agent, Purchaser, Liquidity Provider, the Administrator, the Program Administrator or any other Program Support Provider or any of their respective Affiliates (each an "Affected Person") reasonably determines that the existence of or compliance with: (i) any law or regulation or generally accepted accounting standard or any change therein or in the interpretation or application thereof, in each case adopted, issued or occurring after the date hereof, or (ii) any request, guideline or directive from any central bank or other Governmental Authority (whether or not having the force of law) issued or occurring after the date of this Agreement, affects or would affect the amount of capital required or expected to be maintained by such Affected Person, and such Affected Person determines that the amount of such capital is increased by or based upon the existence of any commitment to make purchases of (or otherwise to maintain the investment in) Pool Receivables related to this Agreement or any related liquidity facility, credit enhancement facility or other commitments of the same type, then, upon demand by such Affected Person (with a copy to the Administrator), the Seller shall promptly pay to the Administrator, for the account of such Affected Person, from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person for both increased costs and 10 maintenance of bargained for yield in the light of such circumstances, to the extent that such Affected Person reasonably determines such increase in capital to be allocable to the existence of any of such commitments. A certificate as to such amounts submitted to the Seller and the Administrator by such Affected Person shall be conclusive and binding for all purposes, absent manifest error. (b) If, due to either: (i) the introduction of or any change in or in the interpretation of any law, regulation or generally accepted accounting standard or (ii) compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Affected Person of agreeing to purchase or purchasing, or maintaining the ownership of, the Purchased Interest or any portion thereof in respect of which Discount is computed by reference to the Euro-Rate, then, upon demand by such Affected Person, the Seller shall promptly pay to such Affected Person, from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person for both increased costs and maintenance of bargained for yield. A certificate as to such amounts submitted to the Seller and the Administrator by such Affected Person shall be conclusive and binding for all purposes, absent manifest error. (c) If such increased costs affect the related Affected Person's portfolio of financing transactions, such Affected Person shall use reasonable averaging and attribution methods to allocate such increased costs to the transactions contemplated by this Agreement. (d) Each Affected Person will notify Seller and the applicable Purchaser Agent promptly after it has received official notice of any event which will entitle such Affected Person to such additional amounts as compensation pursuant to this Section 1.7. Such additional amounts shall accrue from the date as to which such Affected Person becomes subject to such additional costs as a result of such event (or if such notice of such event is not given to Seller by such Affected Person within 90 days after such Affected Person received such official notice of such event, from the date which is 90 days prior to the date such notice is given to Seller by such Affected Person). For avoidance of doubt any increase in cost and/or reduction in yield caused by regulatory capital allocation adjustments due to Financial Accounting Standards Board's Interpretation 46 (or any future statement or interpretation issued by the Financial Accounting Standards Board or any successor thereto) shall be covered by this Section 1.7. Section 1.8. Requirements of Law. If any Affected Person reasonably determines that the existence of or compliance with: (a) any law or regulation or any change therein or in the interpretation or application thereof, in each case adopted, issued or occurring after the date hereof, or (b) any request, guideline or directive from any central bank or other Governmental Authority (whether or not having the force of law) issued or occurring after the date of this Agreement: 11 (i) does or shall subject such Affected Person to any tax of any kind whatsoever with respect to this Agreement, any increase in the Purchased Interest or any portion thereof or in the amount of such Person's Investment relating thereto, or does or shall change the basis of taxation of payments to such Affected Person on account of Collections, Discount or any other amounts payable hereunder (excluding taxes imposed on the overall pre-tax net income of such Affected Person, and franchise taxes imposed on such Affected Person, by the jurisdiction under the laws of which such Affected Person is organized or a political subdivision thereof), (ii) does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, purchases, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Affected Person that are not otherwise included in the determination of the Euro-Rate or the Base Rate hereunder, or (iii) does or shall impose on such Affected Person any other condition, and the result of any of the foregoing is: (A) to increase the cost to such Affected Person of acting as Administrator or as a Purchaser Agent, or of agreeing to purchase or purchasing or maintaining the ownership of undivided percentage ownership interests with regard to the Purchased Interest (or interests therein) or any Portion of Investment, or (B) to reduce any amount receivable hereunder (whether directly or indirectly), then, in any such case, upon demand by such Affected Person, the Seller shall promptly pay to such Affected Person additional amounts necessary to compensate such Affected Person for such additional cost or reduced amount receivable. All such amounts shall be payable as incurred. A certificate from such Affected Person to the Seller and the Administrator certifying, in reasonably specific detail, the basis for, calculation of, and amount of such additional costs or reduced amount receivable shall be conclusive and binding for all purposes, absent manifest error; provided, however, that no Affected Person shall be required to disclose any confidential or tax planning information in any such certificate. Each Affected Person will notify Seller and the applicable Purchaser Agent promptly after it has received official notice of any event which will entitle such Affected Person to such additional amounts as compensation pursuant to this Section 1.8. Such additional amounts shall accrue from the date as to which such Affected Person becomes subject to such additional costs as a result of such event (or if such notice of such event is not given to Seller by such Affected Person within 90 days after such Affected Person received such official notice of such event, from the date which is 90 days prior to the date such notice is given to Seller by such Affected Person). Section 1.9. Inability to Determine Euro-Rate. (a) If the Administrator (or any Purchaser Agent) determines before the first day of any Yield Period (which determination shall be final and conclusive) that, by reason of circumstances affecting the interbank eurodollar market generally, deposits in dollars (in the relevant amounts for such Yield Period) are not being offered to banks in the interbank eurodollar market for such Yield Period, or adequate means do 12 not exist for ascertaining the Euro-Rate for such Yield Period, then the Administrator shall give notice thereof to the Seller. Thereafter, until the Administrator or such Purchaser Agent notifies the Seller that the circumstances giving rise to such suspension no longer exist, (A) no Portion of Investment shall be funded at the Yield Rate determined by reference to the Euro-Rate and (B) the Discount for any outstanding Portions of Investment then funded at the Yield Rate determined by reference to the Euro-Rate shall, on the last day of the then current Yield Period, be converted to the Yield Rate determined by reference to the Base Rate. (b) If, on or before the first day of any Yield Period, the Administrator shall have been notified by any Purchaser, Purchaser Agent or Liquidity Provider that, such Person has determined (which determination shall be final and conclusive) that, any enactment, promulgation or adoption of or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by a governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Person with any guideline, request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for such Person to fund or maintain any Portion of Investment at the Yield Rate and based upon the Euro-Rate, the Administrator shall notify the Seller thereof. Upon receipt of such notice, until the Administrator notifies the Seller that the circumstances giving rise to such determination no longer apply, (A) no Portion of Investment funded by the affected Person shall be funded at the Yield Rate determined by reference to the Euro-Rate and (B) the Discount for any outstanding Portions of Investment then funded at the Yield Rate determined by reference to the Euro-Rate shall be converted to the Yield Rate determined by reference to the Base Rate either (i) on the last day of the then current Yield Period if such Person may lawfully continue to maintain such Portion of Investment at the Yield Rate determined by reference to the Euro-Rate to such day, or (ii) immediately, if such Person may not lawfully continue to maintain such Portion of Investment at the Yield Rate determined by reference to the Euro-Rate to such day. Section 1.10. Extension of Termination Date. The Seller may advise the Administrator and each Purchaser Agent in writing of its desire to extend the Facility Termination Date for an additional 364 days, provided such request is made not more than 90 days prior to, and not less than 60 days prior to, the then current Facility Termination Date. In the event that the Purchaser Agents are all agreeable to such extension, the Administrator shall so notify the Seller in writing (it being understood that the Purchaser Agents may accept or decline such a request in their sole discretion and on such terms as they may elect) not less than 30 days prior to the then current Facility Termination Date and the Seller, the Administrator, the Purchaser Agents and the Purchasers shall enter into such documents as the Purchasers may deem necessary or appropriate to reflect such extension, and all reasonable costs and expenses incurred by the Purchasers, the Administrator and the Purchaser Agents in connection therewith (including reasonable Attorneys' Costs) shall be paid by the Seller. In the event the Purchaser Agents decline the request for such extension, the Administrator shall so notify the Seller of such determination; provided, however, that the failure of the Administrator to notify the Seller of the determination to decline such extension shall not affect the understanding and agreement that the Purchaser Agents shall be deemed to have refused to grant the requested extension in the event the Administrator fails to affirmatively notify the Seller, in writing, of their agreement to accept the requested extension. 13 ARTICLE II REPRESENTATIONS AND WARRANTIES; COVENANTS; TERMINATION EVENTS Section 2.1. Representations and Warranties; Covenants. Each of the Seller and the Servicer hereby makes the representations and warranties, and hereby agrees to perform and observe the covenants, applicable to it set forth in Exhibits III, IV and VI, respectively. Section 2.2. Termination Events. If any of the Termination Events set forth in Exhibit V shall occur, the Administrator may (with the consent of a Simple Majority of the Purchasers) or shall (at the direction of a Simple Majority of the Purchasers), by notice to the Seller, declare the Facility Termination Date to have occurred (in which case the Facility Termination Date shall be deemed to have occurred); provided, that automatically upon the occurrence of any event (without any requirement for the passage of time or the giving of notice) described in paragraph (f) of Exhibit V, the Facility Termination Date shall occur. Upon any such declaration, occurrence or deemed occurrence of the Facility Termination Date, the Administrator, each Purchaser Agent and each Purchaser shall have, in addition to the rights and remedies that they may have under this Agreement, all other rights and remedies provided after default under the New York UCC and under other applicable law, which rights and remedies shall be cumulative. ARTICLE III INDEMNIFICATION Section 3.1. Indemnities by the Seller. Without limiting any other rights that any Purchaser Agent, Purchaser, Liquidity Provider, the Administrator, the Program Administrator or any Program Support Provider or any of their respective Affiliates, shareholders, employees, officers, directors, managers, agents, counsel, successors, transferees or assigns (each, an "Indemnified Party") may have hereunder or under applicable law, the Seller hereby agrees to indemnify each Indemnified Party from and against any and all claims, damages, expenses, costs, losses and liabilities (including Attorney Costs) (all of the foregoing being collectively referred to as "Indemnified Amounts") arising out of or resulting from this Agreement (whether directly or indirectly), the use of proceeds of purchases or reinvestments, the ownership of the Purchased Interest, or any interest therein, or the funding or maintenance thereof, or in respect of any Receivable, Related Security or Contract, excluding, however: (a) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party or its officers, directors, agents or counsel, (b) recourse with respect to any Receivable to the extent that such Receivable is uncollectible on account of the insolvency, bankruptcy or lack of credit worthiness of the related Obligor, or (c) any overall net income taxes or franchise taxes imposed on such Indemnified Party by the jurisdiction under the laws of which such Indemnified Party is organized or any political subdivision thereof. Without limiting or being limited by the foregoing, and subject to the exclusions set forth in the preceding sentence, the Seller shall pay on demand (which demand shall be accompanied by documentation of the Indemnified Amounts, in reasonable detail) to each Indemnified Party any and all amounts necessary to indemnify such Indemnified Party from and against any and all Indemnified Amounts relating to or resulting from any of the following: 14 (i) the failure of any Receivable included in the calculation of the Net Receivables Pool Balance as an Eligible Receivable to be an Eligible Receivable, the failure of any information contained in an Information Package to be true and correct as of the date such information was provided (except to extent that such in formation relates expressly to an earlier date, and in which case such information shall be true and correct as of such earlier date), or the failure of any other information provided to such Indemnified Party by the Seller or Servicer with respect to Receivables or this Agreement to be true and correct as of the date such information was provided (except to extent that such in formation relates expressly to an earlier date, and in which case such information shall be true and correct as of such earlier date), (ii) the failure of any representation, warranty or statement made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement to have been true and correct as of the date made or deemed made in all respects when made, (iii) the failure by the Seller to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract, or the failure of any Pool Receivable or the related Contract to conform to any such applicable law, rule or regulation, (iv) the failure to vest in the Administrator (for the benefit of the Purchasers) a valid and enforceable: (A) perfected undivided percentage ownership interest, to the extent of the Purchased Interest, in the Receivables in, or purporting to be in, the Receivables Pool and the other Pool Assets, or (B) first priority perfected security interest in the Pool Assets, in each case, free and clear of any Adverse Claim, (v) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool and the other Pool Assets, whether at the time of any purchase or reinvestment or at any subsequent time, (vi) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable in, or purporting to be in, the Receivables Pool (including a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the goods or services related to such Receivable or the furnishing or failure to furnish such goods or services or relating to collection activities with respect to such Receivable, (vii) any failure of the Seller, any Originator, any Affiliate of the Seller or the Servicer to perform its duties or obligations in accordance with the 15 provisions hereof and the other Transaction Documents to which it is a party or under the Contracts, (viii) any products liability or other claim, investigation, litigation or proceeding arising out of or in connection with merchandise, insurance or services that are the subject of any Contract, (ix) the commingling of Collections at any time with other funds, (x) the use of proceeds of purchases or reinvestments, or (xi) any reduction in the Aggregate Investment as a result of the distribution of Collections pursuant to Section 1.4(d), if all or a portion of such distributions shall thereafter be rescinded or otherwise must be returned for any reason. Section 3.2. Indemnities by the Servicer. Without limiting any other rights that any Indemnified Party may have hereunder or under applicable law, the Servicer hereby agrees to indemnify each Indemnified Party from and against any and all Indemnified Amounts arising out of or resulting from (whether directly or indirectly): (a) the failure of any information contained in an Information Package to be true and correct as of the date such information was provided (except to extent that such in formation relates expressly to an earlier date, and in which case such information shall be true and correct as of such earlier date), or the failure of any other information provided to such Indemnified Party by, or on behalf of, the Servicer to be true and correct as of the date such information was provided (except to extent that such in formation relates expressly to an earlier date, and in which case such information shall be true and correct as of such earlier date), (b) the failure of any representation, warranty or statement made or deemed made by the Servicer (or any of its officers) under or in connection with this Agreement or any other Transaction Document to which it is a party to have been true and correct as of the date made or deemed made in all respects when made, (c) the failure by the Servicer to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract, (d) any dispute, claim, offset or defense of the Obligor to the payment of any Receivable in, or purporting to be in, the Receivables Pool resulting from or related to the collection activities with respect to such Receivable, (e) any failure of the Servicer to perform its duties or obligations in accordance with the provisions hereof or any other Transaction Document to which it is a party, (f) the failure of the Servicer to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool and the other Pool Assets, for the benefit of the Affected Parties or otherwise, whether at the time of any purchase or reinvestment or at any subsequent time, or (g) any commingling by the Servicer of Collections at any time with other funds. Section 3.3. Funding Plan; Funding Losses. On or before the first Business Day of each calendar month, the Servicer (on behalf of the Seller) shall provide the Administrator and each Purchaser Agent with the Funding Plan for such calendar month (for the avoidance of doubt, any such anticipated purchases (but not reinvestments) and repayments under any Funding Plan remain subject to each of the terms and conditions of this Agreement). If any Affected Person 16 actually incurs any loss (including loss of Yield), cost or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Affected Person), at any time, that is not otherwise paid in connection with the payment of Discount hereunder, as a result of (a) any settlement (including any full or partial repayment of principal) with respect to any Portion of Investment, howsoever funded, being made on any day other than the scheduled last day of an applicable Yield Period with respect thereto or a day set forth in the related Funding Plan, (b) any Purchase not being completed by Seller in accordance with its request therefor under Section 1.2, or (c) any other reduction in a Purchaser's Investment not permitted pursuant to the terms of this Agreement then, upon written notice from the applicable Purchaser Agent to the Seller, the Seller shall pay to such Purchaser Agent for the account of the applicable Affected Persons within 5 Business Days the amount of such loss or expense. Each Affected Person agrees to use commercially reasonable efforts to mitigate any such loss, cost or expense. If an Affected Person incurs any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Affected Person), at any time, and is not entitled to reimbursement for such loss or expense in the manner set forth above, such Affected Party shall individually bear such loss or expense without recourse to, or payment from, any other Affected Party. ARTICLE IV ADMINISTRATION AND COLLECTIONS Section 4.1. Appointment of the Servicer. (a) The servicing, administering and collection of the Pool Receivables shall be conducted by the Person so designated from time to time as the Servicer in accordance with this Section. Until the Administrator gives notice to York (in accordance with this Section 4.1) of the designation of a new Servicer, York is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms hereof. Upon the occurrence of a Termination Event, the Administrator may (with the consent of the Majority Purchasers) or shall (at the direction of the Majority Purchasers) designate as Servicer any Person (including itself) to succeed York or any successor Servicer, on the condition in each case that any such Person so designated shall agree to perform the duties and obligations of the Servicer pursuant to the terms hereof. (b) Upon the designation of a successor Servicer as set forth in clause (a), York agrees that it will terminate its activities as Servicer hereunder in a manner that the Administrator reasonably determines will facilitate the transition of the performance of such activities to the new Servicer, and York shall cooperate with and assist such new Servicer. Such cooperation shall include access to and transfer of related records (including all Contracts) and, subject to restrictions in applicable contracts and agreements use by the new Servicer of all licenses, hardware or software necessary or desirable to collect the Pool Receivables and the Related Security. (c) York acknowledges that, in making their decision to execute and deliver this Agreement, the Administrator and each Purchaser Group have relied on York's agreement to act as Servicer hereunder. Accordingly, York agrees that it will not voluntarily resign as Servicer. 17 (d) The Servicer may delegate its duties and obligations hereunder to any subservicer (each a "Sub-Servicer"); provided, that, in each such delegation: (i) such Sub-Servicer shall agree in writing to perform the duties and obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer shall remain primarily liable for the performance of the duties and obligations so delegated, (iii) the Seller, the Administrator and each Purchaser Group shall have the right to look solely to the Servicer for performance, and (iv) the terms of any agreement with any Sub-Servicer shall provide that the Administrator may terminate such agreement upon the termination of the Servicer hereunder by giving notice of its desire to terminate such agreement to the Servicer (and the Servicer shall provide appropriate notice to each such Sub-Servicer); provided, however, that if any such delegation is to any Person other than an Originator or an Affiliate thereof, the Administrator and the Majority Purchasers shall have consented in writing in advance to such delegation. (e) The Administrator and the Purchasers consent to the outsourcing of certain functions related to the servicing hardware and software utilized by the Servicer to Electronic Data Systems Corporation ("EDSC") as in effect on the date hereof; provided, that (i) the Servicer shall remain primarily liable for the performances and obligations subcontracted and (ii) the Seller, the Administrator, and each Purchaser Group shall have the right to look to the Servicer for performance of such subcontracts. York agrees that it shall provide the Administrator and each Purchaser Agent with: (I) within 10 Business Days of its receipt of a notice of termination from EDSC (or any Person acting on behalf of EDSC) related to such subcontract, a copy of such notice of termination; (II) a copy of any notice of termination issued by it to EDSC, contemporaneously with such delivery to EDSC; and (III) within 10 Business Days of the effectiveness of any material amendment, change, modification or waiver with respect to such subcontract to the extent related to accounts receivable outsourcing, an executed copy of such amendment, modification or waiver. Section 4.2. Duties of the Servicer. (a) The Servicer shall take or cause to be taken all such action as may be necessary or advisable to administer and collect each Pool Receivable from time to time, all in accordance with this Agreement and all applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policies. The Servicer shall set aside, for the account of each Purchaser Group, the amount of the Collections to which each such Purchaser Group is entitled in accordance with Article I. The Servicer may, in accordance with the applicable Credit and Collection Policy, take such action as the Servicer may determine to be appropriate to maximize Collections thereof or reflect adjustments required under the applicable Contract; provided, however, that: (i) such action shall not change the number of days such Pool Receivable has remained unpaid from the date of the original due date related to such Pool Receivable, (ii) such action shall not alter the status of such Pool Receivable as a Delinquent Receivable or a Defaulted Receivable or limit the rights of the Administrator or any Purchaser Group under this Agreement and (iii) if a Termination Event has occurred and York or an Affiliate thereof is serving as the Servicer, York or such Affiliate may take such action only upon the prior approval of the Administrator (with the consent of the 18 Majority Purchasers). The Seller shall deliver to the Servicer and the Servicer shall hold for the benefit of the Seller and the Administrator (individually and for the benefit of each Purchaser Group), in accordance with their respective interests, all records and documents (including computer tapes or disks) with respect to each Pool Receivable. Notwithstanding anything to the contrary contained herein, the Administrator may direct the Servicer (whether the Servicer is York or any other Person) to commence or settle any legal action to enforce collection of any Pool Receivable or to foreclose upon or repossess any Related Security; provided, however, that no such direction may be given unless either: (A) a Termination Event has occurred or (B) the Administrator believes in good faith that failure to commence, settle or effect such legal action, foreclosure or repossession could adversely affect Receivables constituting a material portion of the Pool Receivables. (b) The Servicer shall, as soon as practicable following actual receipt of collected funds, turn over to the Seller the collections of any indebtedness that is not a Pool Receivable, less, if York or an Affiliate thereof is not the Servicer, all reasonable and appropriate out-of-pocket costs and expenses of such Servicer of servicing, collecting and administering such collections. The Servicer, if other than York or an Affiliate thereof, shall, as soon as practicable upon demand, deliver to the Seller all records in its possession that evidence or relate to any indebtedness that is not a Pool Receivable, and copies of records in its possession that evidence or relate to any indebtedness that is a Pool Receivable. (c) The Servicer's obligations hereunder shall terminate on the later of: (i) the Facility Termination Date and (ii) the date on which all amounts required to be paid to the Purchaser Agents, each Purchaser, the Administrator and any other Indemnified Party or Affected Person hereunder shall have been paid in full. After such termination, if York or an Affiliate thereof was not the Servicer on the date of such termination, the Servicer shall promptly deliver to the Seller all books, records and related materials that the Seller previously provided to the Servicer, or that have been obtained by the Servicer, in connection with this Agreement. Section 4.3. Lock-Box Account Arrangements. Upon the occurrence of a Termination Event, the Administrator may (with the consent of a Simple Majority of the Purchasers) or shall (upon the direction of a Simple Majority of the Purchasers) at any time thereafter give notice to each Lock-Box Bank that the Administrator is exercising its rights under the Lock-Box Agreements to do any or all of the following: (a) to have the exclusive ownership and control of the Lock-Box Accounts (and the related lock-boxes) transferred to the Administrator (for the benefit of the Purchasers) and to exercise exclusive dominion and control over the funds deposited therein, (b) to have the proceeds that are sent to the respective Lock-Box Accounts (and the respective related lock-boxes) redirected pursuant to the Administrator's instructions rather than deposited in the applicable Lock-Box Account (or sent to the applicable related lock-box), and (c) to take any or all other actions permitted under the applicable Lock-Box Agreement. The Seller hereby agrees that if the Administrator at any time takes any action set forth in the preceding sentence, the Administrator shall have exclusive control (for the benefit of the Purchasers) of the proceeds (including Collections) of all Pool Receivables and the Seller 19 hereby further agrees to take any other action that the Administrator or any Purchaser Agent may reasonably request to transfer such control. Any proceeds of Pool Receivables received by the Seller or the Servicer thereafter shall be sent immediately to the Administrator. The parties hereto hereby acknowledge that if at any time the Administrator takes control of any Lock-Box Account (and any such related lock-box), the Administrator shall not have any rights to the funds therein in excess of the unpaid amounts due to the Administrator, the Purchaser Groups, any Indemnified Party or any other Person hereunder, and the Administrator shall distribute or cause to be distributed such funds in accordance with Section 4.2(b) and Article I (in each case as if such funds were held by the Servicer thereunder). Section 4.4. Enforcement Rights. (a) At any time following the occurrence of a Termination Event: (i) the Administrator may (with the consent or at the direction of the Majority Purchasers) direct the Obligors that payment of all amounts payable under any Pool Receivable is to be made directly to the Administrator or its designee, (ii) the Administrator may (with the consent or at the direction of the Majority Purchasers) instruct the Seller or the Servicer to give notice of the Purchaser Groups' interest in Pool Receivables to each Obligor, which notice shall direct that payments be made directly to the Administrator or its designee (on behalf of such Purchaser Groups), and the Seller or the Servicer, as the case may be, shall give such notice at the expense of the Seller or the Servicer, as the case may be; provided, that if the Seller or the Servicer, as the case may be, fails to so notify each Obligor, the Administrator (at the Seller's or the Servicer's, as the case may be, expense) may so notify the Obligors, and (iii) the Administrator may (with the consent or at the direction of the Majority Purchasers) request the Servicer to, and upon such request the Servicer shall: (A) assemble all of the records necessary or desirable to collect the Pool Receivables and the Related Security, and transfer or license (or cause to be licensed) to a successor Servicer the use of all software necessary or desirable to collect the Pool Receivables and the Related Security, and make the same available to the Administrator or its designee (for the benefit of the Purchasers) at a place selected by the Administrator, and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections in a manner acceptable to the Administrator and, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Administrator or its designee. (b) The Seller hereby authorizes the Administrator (on behalf of each Purchaser Group), and irrevocably appoints the Administrator as its attorney-in-fact with full power of substitution and with full authority in the place and stead of the Seller, which appointment is coupled with an interest, to take any and all steps in the name of the Seller and on behalf of the Seller necessary or desirable, in the determination of the 20 Administrator, after the occurrence of a Termination Event, to collect any and all amounts or portions thereof due under any and all Pool Assets, including endorsing the name of the Seller on checks and other instruments representing Collections and enforcing such Pool Assets. Notwithstanding anything to the contrary contained in this subsection, none of the powers conferred upon such attorney-in-fact pursuant to the preceding sentence shall subject such attorney-in-fact to any liability if any action taken by it shall prove to be inadequate or invalid, nor shall they confer any obligations upon such attorney-in-fact in any manner whatsoever. (c) The parties hereto hereby acknowledge that if at any time the Administrator takes steps in the name of Seller and on behalf of the Seller pursuant to the powers granted in Section 4.4(b) to collect any and all amounts or portions thereof due under any Pool Assets, the Administrator shall not have any rights to collect amounts or portions thereof in excess of the unpaid amounts due to the Administrator, the Purchaser Groups, any Indemnified Party or any other Persons hereunder, and the Administrator shall distribute or cause to be distributed such amounts in accordance with Section 4.2(b) and Article I (in each case as if such amounts were hold by the Servicer thereunder). Section 4.5. Responsibilities of the Seller. (a) Anything herein to the contrary notwithstanding, the Seller shall: (i) perform all of its obligations, if any, under the Contracts related to the Pool Receivables to the same extent as if interests in such Pool Receivables had not been transferred hereunder, and the exercise by the Administrator, the Purchaser Agents or the Purchasers of their respective rights hereunder shall not relieve the Seller from such obligations, and (ii) pay when due any taxes, including any sales taxes payable in connection with the Pool Receivables and their creation and satisfaction. The Administrator, the Purchaser Agents or any of the Purchasers shall not have any obligation or liability with respect to any Pool Asset, nor shall any of them be obligated to perform any of the obligations of the Seller, Servicer, York or the Originators thereunder. (b) York hereby irrevocably agrees that if at any time it shall cease to be the Servicer hereunder, it shall act (if the then-current Servicer so requests) as the data-processing agent of the Servicer and, in such capacity, York shall conduct the data-processing functions of the administration of the Receivables and the Collections thereon in substantially the same way that York conducted such data-processing functions while it acted as the Servicer and shall be entitled to recover from the Servicing Fee its reasonable costs and expenses incurred while acting as such data-processing agent of the Servicer. Section 4.6. Servicing Fee. (a) Subject to clause (b), the Servicer shall be paid a fee (the "Servicing Fee") equal to 1.00% per annum of the daily average aggregate Outstanding Balance of the Pool Receivables. The Aggregate of each Purchaser Group's Ratable Share of such fee shall be paid through the distributions contemplated by Section 1.4(d), and the Seller's Share of such fee shall be paid by the Seller. 21 (b) If the Servicer ceases to be York or an Affiliate thereof, the servicing fee shall be the greater of: (i) the amount calculated pursuant to clause (a), and (ii) an alternative amount specified by the successor Servicer not to exceed 110% of the aggregate reasonable costs and expenses incurred by such successor Servicer in connection with the performance of its obligations as Servicer. ARTICLE V THE AGENTS Section 5.1. Appointment and Authorization. (a) Each Purchaser and each Purchaser Agent hereby irrevocably designates and appoints BTMNY as the "Administrator" hereunder and authorizes the Administrator to take such actions and to exercise such powers as are delegated to the Administrator hereby and to exercise such other powers as are reasonably incidental thereto. Further, Gotham, pursuant to the Program Administration Agreement, has appointed and authorized the Program Administrator (or its respective designees) to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Program Administrator by the terms hereof, together with such powers as are reasonably incidental thereto. The Administrator shall hold, in its name, for the benefit of each Purchaser, ratably, the Purchased Interest. The Administrator shall not have any duties other than those expressly set forth herein or any fiduciary relationship with any Purchaser or Purchaser Agent, and no implied obligations or liabilities shall be read into this Agreement, or otherwise exist, against the Administrator. The Administrator does not assume, nor shall it be deemed to have assumed, any obligation to, or relationship of trust or agency with, the Seller or Servicer. Notwithstanding any provision of this Agreement or any other Transaction Document to the contrary, in no event shall the Administrator ever be required to take any action which exposes the Administrator to personal liability or which is contrary to the provision of any Transaction Document or applicable law. (b) Each Purchaser hereby irrevocably designates and appoints the respective institution identified as the Purchaser Agent for such Purchaser's Purchaser Group on the signature pages hereto or in the Assumption Agreement or Transfer Supplement pursuant to which such Purchaser becomes a party hereto, and each authorizes such Purchaser Agent to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to such Purchaser Agent by the terms of this Agreement, if any, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Purchaser Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Purchaser or other Purchaser Agent or the Administrator, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of such Purchaser Agent shall be read into this Agreement or otherwise exist against such Purchaser Agent. (c) Except as otherwise specifically provided in this Agreement, the provisions of this Article V are solely for the benefit of the Purchaser Agents, the Administrator and the Purchasers, and none of the Seller or Servicer shall have any rights as a third-party beneficiary or otherwise under any of the provisions of this Article V, except that this Article V shall not affect any obligations which any Purchaser Agent, the Administrator or any Purchaser may have to the 22 Seller or the Servicer under the other provisions of this Agreement. Furthermore, no Purchaser shall have any rights as a third-party beneficiary or otherwise under any of the provisions hereof in respect of a Purchaser Agent which is not the Purchaser Agent for such Purchaser. (d) In performing its functions and duties hereunder, the Administrator shall act solely as the agent of the Purchasers and the Purchaser Agents and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for the Seller or Servicer or any of their successors and assigns. In performing its functions and duties hereunder, each Purchaser Agent shall act solely as the agent of its respective Purchaser and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for the Seller, the Servicer, any other Purchaser, any other Purchaser Agent or the Administrator, or any of their respective successors and assigns. Section 5.2. Delegation of Duties. The Administrator may execute any of its duties through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrator shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. Section 5.3. Exculpatory Provisions. None of the Purchaser Agents, the Administrator, the Program Administrator or any of their shareholders, directors, officers, managers, agents or employees shall be liable for any action taken or omitted (i) with the consent or at the direction of the Majority Purchasers (or in the case of any Purchaser Agent, the Purchasers within its Purchaser Group that have a majority of the aggregate Commitment of such Purchaser Group) or (ii) in the absence of such Person's gross negligence or willful misconduct. The Administrator shall not be responsible to any Purchaser, Purchaser Agent, the Program Administrator or other Person for (i) any recitals, representations, warranties or other statements made by the Seller, Servicer, or any of their Affiliates, (ii) the value, validity, effectiveness, genuineness, enforceability or sufficiency of any Transaction Document, (iii) any failure of the Seller, any Originator or any of their Affiliates to perform any obligation or (iv) the satisfaction of any condition specified in Exhibit II. The Administrator shall not have any obligation to any Purchaser or Purchaser Agent to ascertain or inquire about the observance or performance of any agreement contained in any Transaction Document or to inspect the properties, books or records of the Seller, Servicer, any Originator or any of their Affiliates. Section 5.4. Reliance by Agents. (a) Each Purchaser Agent, the Program Administrator and the Administrator shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document or other writing or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person and upon advice and statements of legal counsel (including counsel to the Seller), independent accountants and other experts selected by the Administrator. Each Purchaser Agent and the Administrator shall in all cases be fully justified in failing or refusing to take any action under any Transaction Document unless it shall first receive such advice or concurrence of the Majority Purchasers (or in the case of any Purchaser Agent, the Purchasers within its Purchaser Group that have a majority of the aggregate Commitment of such Purchaser Group), and assurance of its indemnification, as it deems appropriate. 23 (b) The Administrator shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Majority Purchasers or the Purchaser Agents, and such request and any action taken or failure to act pursuant thereto shall be binding upon all Purchasers, the Administrator and Purchaser Agents. (c) The Purchasers within each Purchaser Group with a majority of the Commitment of such Purchaser Group shall be entitled to request or direct the related Purchaser Agent to take action, or refrain from taking action, under this Agreement on behalf of such Purchasers. Such Purchaser Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of such majority Purchasers, and such request and any action taken or failure to act pursuant thereto shall be binding upon all of such Purchaser Agent's Purchasers. (d) Unless otherwise advised in writing by a Purchaser Agent or by any Purchaser on whose behalf such Purchaser Agent is purportedly acting, each party to this Agreement may assume that (i) such Purchaser Agent is acting for the benefit of each of the Purchasers in respect of which such Purchaser Agent is identified as being the "Purchaser Agent" in the definition of "Purchaser Agent" hereto, as well as for the benefit of each assignee or other transferee from any such Person, and (ii) each action taken by such Purchaser Agent has been duly authorized and approved by all necessary action on the part of the Purchasers on whose behalf it is purportedly acting. Each Purchaser Agent and its Purchaser(s) shall agree amongst themselves as to the circumstances and procedures for removal, resignation and replacement of such Purchaser Agent. Section 5.5. Notice of Termination Events. Neither any Purchaser Agent nor the Administrator shall be deemed to have knowledge or notice of the occurrence of any Termination Event or Unmatured Termination Event unless such Person has received notice from any Purchaser, Purchaser Agent, the Servicer or the Seller stating that a Termination Event or an Unmatured Termination Event has occurred hereunder and describing such Termination Event or Unmatured Termination Event. In the event that the Administrator receives such a notice, it shall promptly give notice thereof to each Purchaser Agent whereupon each such Purchaser Agent shall promptly give notice thereof to its Purchasers. In the event that a Purchaser Agent receives such a notice (other than from the Administrator), it shall promptly give notice thereof to the Administrator. The Administrator shall take such action concerning a Termination Event or an Unmatured Termination Event as may be directed by the Majority Purchasers (unless such action otherwise requires the consent of all Purchasers), but until the Administrator receives such directions, the Administrator may (but shall not be obligated to) take such action, or refrain from taking such action, as the Administrator deems advisable and in the best interests of the Purchasers and Purchaser Agents. Section 5.6. Non-Reliance on Administrator, Purchaser Agents and Other Purchasers. Each Purchaser expressly acknowledges that none of the Administrator, the Purchaser Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrator, or any Purchaser Agent hereafter taken, including any review of the affairs of the Seller, York, Servicer or any Originator, shall be deemed to constitute any representation or warranty by the Administrator or such Purchaser Agent, as applicable. Each Purchaser represents and warrants 24 to the Administrator and the Purchaser Agents that, independently and without reliance upon the Administrator, Purchaser Agents or any other Purchaser and based on such documents and information as it has deemed appropriate, it has made and will continue to make its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Seller, York, Servicer or the Originators, and the Receivables and its own decision to enter into this Agreement and to take, or omit, action under any Transaction Document. Except for items specifically required to be delivered hereunder, the Administrator shall not have any duty or responsibility to provide any Purchaser Agent with any information concerning the Seller, York, Servicer or the Originators or any of their Affiliates that comes into the possession of the Administrator or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. Section 5.7. Administrators and Affiliates. Each of the Purchasers, the Program Administrator and the Administrator and their Affiliates may extend credit to, accept deposits from and generally engage in any kind of banking, trust, debt, equity or other business with the Seller, York, Servicer or any Originator or any of their Affiliates and BTMNY may exercise or refrain from exercising its rights and powers as if it were not the Administrator. With respect to the acquisition of the Eligible Receivables pursuant to this Agreement, each of the Purchaser Agents and the Administrator shall have the same rights and powers under this Agreement as any Purchaser and may exercise the same as though it were not such an agent, and the terms "Purchaser" and "Purchasers" shall include each of the Purchaser Agents and the Administrator in their individual capacities. Section 5.8. Indemnification. Each Purchaser Group shall indemnify and hold harmless the Administrator (but solely in its capacity as Administrator) and its officers, directors, employees, representatives, counsel and agents (to the extent not reimbursed by the Seller, York or Servicer and without limiting the obligation of the Seller, York or Servicer to do so), ratably in accordance with its Ratable Share from and against any and all liabilities, obligations, losses, damages, penalties, judgments, settlements, costs, expenses and disbursements of any kind whatsoever (including in connection with any investigative or threatened proceeding, whether or not the Administrator or such Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against the Administrator or such Person as a result of, or related to, any of the transactions contemplated by the Transaction Documents or the execution, delivery or performance of the Transaction Documents or any other document furnished in connection therewith (but excluding any such liabilities, obligations, losses, damages, penalties, judgments, settlements, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Administrator or such Person as finally determined by a court of competent jurisdiction); provided, that in the case of each Purchaser that is a commercial paper conduit, such indemnity shall be provided solely to the extent of amounts received by such Purchaser under this Agreement which exceed the amounts required to repay such Purchaser's outstanding Notes. Notwithstanding anything in this Section 5.8 to the contrary, each of the Administrator, each Purchaser Agent and each Purchaser hereby covenants and agrees that it shall not institute against, or join any other Person in instituting against, any Conduit Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy or similar law, for one year and a day after the latest maturing Note issued by such Conduit Purchaser is paid in full. 25 Section 5.9. Successor Administrator. The Administrator may, upon at least five (5) days notice to the Seller, each Purchaser and each Purchaser Agent, resign as Administrator. Such resignation shall not become effective until a successor agent is appointed by the Majority Purchasers and has accepted such appointment. Upon such acceptance of its appointment as Administrator hereunder by a successor Administrator, such successor Administrator shall succeed to and become vested with all the rights and duties of the retiring Administrator, and the retiring Administrator shall be discharged from its duties and obligations under the Transaction Documents. After any retiring Administrator's resignation hereunder, the provisions of Sections 3.1 and 3.2 and this Article V shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrator. ARTICLE VI MISCELLANEOUS Section 6.1. Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Transaction Document, or consent to any departure by the Seller or the Servicer therefrom, shall be effective unless in a writing signed by the Administrator and each of the Majority Purchasers, and, in the case of any amendment, by the other parties thereto; and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that, if required by the securitization program documents governing any Conduit Purchaser's commercial paper program, no such material amendment shall be effective until both Moody's and Standard & Poor's have notified the related Purchaser Agent in writing that such action will not result in a reduction or withdrawal of the rating of any Notes; provided, further that no such amendment or waiver shall, without the consent of each affected Purchaser, (A) extend the date of any payment or deposit of Collections by the Seller or the Servicer, (B) reduce the rate or extend the time of payment of Discount, (C) reduce any fees payable to the Administrator, any Purchaser Agent or any Purchaser pursuant to the applicable Purchaser Group Fee Letter, (D) change the amount of Investment of any Purchaser, any Purchaser's pro rata share of the Purchased Interest or any Related Committed Purchaser's Commitment, (E) amend, modify or waive any provision of the definition of "Majority Purchaser" or this Section 6.1, (F) consent to or permit the assignment or transfer by the Seller of any of its rights and obligations under this Agreement, (G) change the definition of "Concentration Percentage," "Concentration Reserve," "Concentration Reserve Percentage," "Eligible Receivable," "Ineligible Elimination Amounts," "Loss Reserve," "Loss Reserve Percentage," "Dilution Reserve," "Dilution Reserve Percentage," "Specifically Reserved Dilution Amount," "Termination Event," "Total Reserve," "Yield Reserve," or "Yield Reserve Percentage", (H) amend or modify any defined term (or any defined term used directly or indirectly in such defined term) used in clauses (A) through (G) above in a manner that would circumvent the intention of the restrictions set forth in such clauses, or (I) otherwise materially and adversely affect the rights of any such Purchaser hereunder. No failure on the part of the Purchasers or the Administrator to exercise, and no delay in exercising any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. Section 6.2. Notices, Etc. All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shall include facsimile communication) and be sent or delivered to each party hereto at its address set forth under its name on the signature pages 26 hereof (or in any Assumption Agreement pursuant to which it became a party hereto) or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and communications by facsimile shall be effective when sent (and shall be followed by hard copy sent by first class mail), and notices and communications sent by other means shall be effective when received. Section 6.3. Successors and Assigns; Participations; Assignments. (a) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Except as otherwise provided herein, neither the Seller nor York, as Servicer, may assign or transfer any of its respective rights or obligations or delegate any of its respective duties hereunder or under any Transaction Document without the prior written consent of the Administrator, the Purchaser Agents and the Purchasers. (b) Participations. Any Purchaser may sell to one or more Persons (each a "Participant") participating interests in the interests of such Purchaser hereunder; provided, however, that no Purchaser shall grant any participation under which the Participant shall have rights to approve any amendment to or waiver of this Agreement or any other Transaction Document. Such Purchaser shall remain solely responsible for performing its obligations hereunder, and the Seller, each Purchaser Agent and the Administrator shall continue to deal solely and directly with such Purchaser in connection with such Purchaser's rights and obligations hereunder. A Purchaser shall not agree with a Participant to restrict such Purchaser's right to agree to any amendment hereto, except amendments that require the consent of all Purchasers. (c) Assignments by Certain Related Committed Purchasers. Any Related Committed Purchaser may assign to one or more Persons (each a "Purchasing Related Committed Purchaser"), reasonably acceptable to the related Purchaser Agent in its sole discretion, any portion of its Commitment pursuant to a supplement hereto, substantially in the form of Annex D hereto with any changes as have been approved by the parties thereto (a "Transfer Supplement"), executed by each such Purchasing Related Committed Purchaser, such selling Related Committed Purchaser, such related Purchaser Agent. Any such assignment by Related Committed Purchaser cannot be for an amount less than $10,000,000. Upon (i) the execution of the Transfer Supplement, (ii) delivery of an executed copy thereof to the Seller, such related Purchaser Agent and the Administrator and (iii) payment by the Purchasing Related Committed Purchaser to the selling Related Committed Purchaser of the agreed purchase price, such selling Related Committed Purchaser shall be released from its obligations hereunder to the extent of such assignment and such Purchasing Related Committed Purchaser shall for all purposes be a Related Committed Purchaser party hereto and shall have all the rights and obligations of a Related Committed Purchaser hereunder to the same extent as if it were an original party hereto. The amount of the Commitment of the selling Related Committed Purchaser allocable to such Purchasing Related Committed Purchaser shall be equal to the amount of the Commitment of the selling Related Committed Purchaser transferred regardless of the purchase price paid therefor. The Transfer Supplement shall be an amendment hereof only to the extent necessary to reflect the addition of such Purchasing 27 Related Committed Purchaser as a "Related Committed Purchaser" and any resulting adjustment of the selling Related Committed Purchaser's Commitment. (d) Replaceable Related Committed Purchaser. If any Related Committed Purchaser (a "Replaceable Related Committed Purchaser") shall (i) petition the Seller for any amounts under Section 1.7 or 1.8 or (ii) cease to have a short-term debt rating of "A-1" by Standard & Poor's or "P-1" by Moody's (if such a rating is required by the related Purchaser's securitization program), the related Purchaser Agent or the Administrator may and if requested by the Seller, use its reasonable best efforts to designate a replacement financial institution (a "Replacement Related Committed Purchaser"), to which such Replaceable Related Committed Purchaser shall, subject to its receipt of an amount equal to the aggregate outstanding principal balance of its Investment and accrued and unpaid Discount thereon (and, if applicable, its receipt (unless a later date for the remittance thereof shall be agreed upon by the Seller and such Replaceable Related Committed Purchaser) of all amounts claimed under Section 1.7 and/or 1.8) promptly assign all of its rights, obligations and Commitment hereunder, together with all of its right, title and interest in, to and under the Purchased Interest allocable to it, to the Replacement Related Committed Purchaser in accordance with Section 6.3(c), above. Once such assignment becomes effective, the Replacement Related Committed Purchaser shall be deemed to be a "Related Committed Purchaser" for all purposes hereof and such Replaceable Related Committed Purchaser shall cease to be "Related Committed Purchaser" for all purposes hereof and shall have no further rights or obligations hereunder. (e) Assignment by Conduit Purchasers. Each party hereto agrees and consents (i) to any Conduit Purchaser's assignment, participation, grant of security interests in or other transfers of any portion of, or any of its beneficial interest in, the Purchased Interest (or portion thereof), including without limitation to any collateral agent or Program Support Provider in connection with its commercial paper program and (ii) to the complete assignment by any Conduit Purchaser of all of its rights and obligations hereunder to any other Person, and upon such assignment such Conduit Purchaser shall be released from all obligations and duties, if any, hereunder; provided, however, that such Conduit Purchaser may not, without the prior consent of its Related Committed Purchasers, make any such transfer of its rights hereunder under clause (ii) above unless the assignee (i) is principally engaged in the purchase of assets similar to the assets being purchased hereunder, (ii) has as its Purchaser Agent the Purchaser Agent of the assigning Conduit Purchaser and (iii) issues commercial paper or other Notes with credit ratings substantially comparable to the ratings of the assigning Conduit Purchaser. Any assigning Conduit Purchaser shall deliver to any assignee a supplement hereto, substantially in the form of Annex D hereto with any changes as have been approved by the parties thereto (also, a "Transfer Supplement"), duly executed by such Conduit Purchaser, assigning any portion of its interest in the Purchased Interest to its assignee. Such Conduit Purchaser shall promptly (i) notify each of the other parties hereto of such assignment and (ii) take all further action that the assignee reasonably requests in order to evidence the assignee's right, title and interest in such interest in the Purchased Interest and to enable the assignee to exercise or enforce any rights of such Conduit Purchaser hereunder. Upon the assignment of any portion of its interest in the Purchased Interest, 28 the assignee shall have all of the rights hereunder with respect to such interest (except that the Discount therefor shall thereafter accrue at the rate, determined with respect to the assigning Conduit Purchaser unless the Seller, the related Purchaser Agent and the assignee shall have agreed upon a different Discount). (f) Opinions of Counsel. If required by the Administrator or the applicable Purchaser Agent or to maintain the ratings of any Conduit Purchaser's Notes, each Transfer Supplement must be accompanied by an opinion of counsel of the assignee as to such matters as the Administrator or such Purchaser Agent may reasonably request. Section 6.4. Costs, Expenses and Taxes. (a) In addition to the rights of indemnification granted under Section 3.1, the Seller agrees to pay on demand (which demand shall be accompanied by documentation thereof in reasonable detail) all reasonable costs and expenses in connection with the preparation, execution, delivery and administration (including periodic audits by the Administrator of Pool Receivables) of this Agreement, the other Transaction Documents and the other documents and agreements to be delivered hereunder (and all reasonable costs and expenses in connection with any amendment, waiver or modification of any thereof), including: (i) Attorney Costs for the Administrator, each Purchaser Group and their respective Affiliates and agents with respect thereto and with respect to advising the Administrator, each Purchaser Group and their respective Affiliates and agents as to their rights and remedies under this Agreement and the other Transaction Documents, (ii) all reasonable costs and expenses (including Attorney Costs and due diligence costs and expenses), if any, of the Administrator, each Purchaser Group and their respective Affiliates and agents in connection with the enforcement of this Agreement and the other Transaction Documents and (iii) all costs and expenses (including Attorney Costs) of the Administrator, each Purchaser Group and their respective Affiliates and agents in connection with any Take Out Securitization or the satisfaction of the conditions precedent thereto. (b) In addition, the Seller shall pay on demand any and all stamp and other taxes and fees payable in connection with the execution, delivery, filing and recording of this Agreement or the other documents or agreements to be delivered hereunder, and agrees to save each Indemnified Party harmless from and against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. Section 6.5. No Proceedings; Limitation on Payments. (a) Each of the Seller, York, the Servicer, the Administrator, the Purchaser Agents, the Purchasers, each assignee of the Purchased Interest or any interest therein, and each Person that enters into a commitment to purchase the Purchased Interest or interests therein, hereby covenants and agrees that it will not institute against, or join any other Person in instituting against, any Conduit Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and one day after the latest maturing Note issued by such Conduit Purchaser is paid in full. The provisions of this Section 6.5(a) shall survive any termination of this Agreement. 29 (b) Notwithstanding any provisions contained in this Agreement to the contrary, no Conduit Purchaser shall or shall be obligated to, pay any amount, if any, payable by it pursuant to this Agreement or any other Transaction Document unless (i) such Conduit Purchaser has received funds which may be used to make such payment and which funds are not required to repay the Notes when due and (ii) after giving effect to such payment, either (x) such Conduit Purchaser could issue Notes to refinance all outstanding Notes (assuming such outstanding Notes matured at such time) in accordance with the program documents governing such Conduit Purchaser's securitization program or (y) all Notes are paid in full. Any amount which such Conduit Purchaser does not pay pursuant to the operation of the preceding sentence shall not constitute a claim (as defined in Section. 101 of the Bankruptcy Code) against or company obligation of such Conduit Purchaser for any such insufficiency unless and until such Conduit Purchaser satisfies the provisions of clauses (i) and (ii) above. The provisions of this Section 6.5(b) shall survive any termination of this Agreement. Section 6.6. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF A SECURITY INTEREST OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW. Section 6.7. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which, when so executed, shall be deemed to be an original, and all of which, when taken together, shall constitute one and the same agreement. 30 Section 6.8. Survival of Termination. The provisions of Sections 1.7, 1.8, 3.1, 3.2, 6.4, 6.5, 6.6, 6.9 and 6.14 shall survive any termination of this Agreement. Section 6.9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF THE PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING THAT SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. Section 6.10. Sharing of Recoveries. Each Purchaser agrees that if it receives any recovery, through set-off, judicial action or otherwise, on any amount payable or recoverable hereunder in a greater proportion than should have been received hereunder or otherwise inconsistent with the provisions hereof, then the recipient of such recovery shall purchase for cash an interest in amounts owing to the other Purchasers (as return of Investment or otherwise), without representation or warranty except for the representation and warranty that such interest is being sold by each such other Purchaser free and clear of any Adverse Claim created or granted by such other Purchaser, in the amount necessary to create proportional participation by the Purchaser in such recovery. If all or any portion of such amount is thereafter recovered from the recipient, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Section 6.11. Right of Setoff. During a Termination Event, each Purchaser is hereby authorized (in addition to any other rights it may have) to setoff, appropriate and apply (without presentment, demand, protest or other notice which are hereby expressly waived) any deposits and any other indebtedness held or owing by such Purchaser (including by any branches or agencies of such Purchaser) to, or for the account of, the Seller against amounts owing by the Seller hereunder (even if contingent or unmatured). Section 6.12. Entire Agreement. This Agreement and the other Transaction Documents embody the entire agreement and understanding between the parties hereto, and supersede all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof. Section 6.13. Headings. The captions and headings of this Agreement and any Exhibit, Schedule or Annex hereto are for convenience of reference only and shall not affect the interpretation hereof or thereof. 31 Section 6.14. Purchaser Groups' Liabilities. The obligations of each Purchaser Agent and each Purchaser under the Transaction Documents are solely the corporate obligations of such Person. Except with respect to any claim arising out of the intentional breach of this Agreement, willful misconduct or gross negligence of the Administrator, any Purchaser Agent or any Purchaser, no claim may be made by the Seller or the Servicer or any other Person against the Administrator, any Purchaser Agent or any Purchaser or their respective Affiliates, shareholders, directors, officers, employees, managers, attorneys or agents (including J.H. Management Corporation) for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by the Agreement or any other Transaction Document, or any act, omission or event occurring in connection therewith; and each of Seller and Servicer hereby waives, releases, and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Section 6.15. Confidentiality. Unless otherwise required by applicable law, each of the Seller and the Servicer agrees to maintain the confidentiality of this Agreement and the other Transaction Documents (and all drafts thereof) in communications with third parties and otherwise; provided, that this Agreement may be disclosed to: (a) third parties to the extent such disclosure is made pursuant to a written agreement of confidentiality in form and substance reasonably satisfactory to the Administrator, and (b) the Seller's legal counsel and auditors if they agree to hold it confidential. Unless otherwise required by applicable law, each of the Administrator, the Purchaser Agents and the Purchasers agree to maintain the confidentiality of non-public financial information regarding York and its Subsidiaries and Affiliates; provided, that such information may be disclosed to: (i) third parties to the extent such disclosure is made pursuant to a written agreement of confidentiality in form and substance reasonably satisfactory to York, (ii) legal counsel and auditors of the Purchasers, the Purchaser Agents or the Administrator if they agree to hold it confidential, (iii) the rating agencies rating the Notes, (iv) any Program Support Provider, potential Program Support Provider and the Program Administrator (if they agree to hold it confidential), (v) any placement agent placing the Notes and (vi) any regulatory authorities having jurisdiction over BTMNY, BNS, the Purchasers, the Purchaser Agents or any Program Support Provider. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 32 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. YORK RECEIVABLES FUNDING LLC, as Seller By: _______________________________________________ Name: _________________________________________ Title: ________________________________________ Address: York Receivables Funding LLC 1403 Foulk Road, Suite 102 Wilmington, Delaware 19803 Attention: James P. Corcoran Telephone: (717) 771-7438 Facsimile: (717) 771-6843 YORK INTERNATIONAL CORPORATION By: _______________________________________________ Name: _________________________________________ Title: ________________________________________ Address: York International Corporation 631 S. Richland Avenue York, Pennsylvania 17403 Attention: James P. Corcoran Telephone: (717) 771-7438 Facsimile: (717) 771-6843 S-1 Amended and Restated Receivables Purchase Agreement THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH, as Administrator By: ________________________________________ Name:___________________________________ Title:__________________________________ Address: The Bank of Tokyo-Mitsubishi, Ltd., New York Branch 1251 Avenue of the Americas New York, NY 10020-1104 Attention: Securitization Group Telephone No.: 212-782-6963 Facsimile No.: 212-782-6448 S-2 Amended and Restated Receivables Purchase Agreement PURCHASERS: GOTHAM FUNDING CORPORATION, as a Conduit Purchaser By: _______________________________________ Name: _________________________________ Title: ________________________________ Address: Gotham Funding Corporation c/o J.H. Management Corporation One International Plaza Boston, MA 02110 Attention: Nancy D. Smith Telephone No.: 617-951-7727 Facsimile No.: 617-951-7050 With a copy to: The Bank of Tokyo-Mitsubishi, Ltd., New York Branch 1251 Avenue of the Americas New York, NY 10020-1104 Attention: Securitization Group Telephone No.: 212-782-6963 Facsimile No.: 212-782-6448 S-3 Amended and Restated Receivables Purchase Agreement LIBERTY STREET FUNDING CORP., as a Conduit Purchaser By: ______________________________________ Name: ________________________________ Title: _______________________________ Address: Liberty Street Funding Corp. c/o Global Securitization Services, LLC 114 West 47th Street, Suite 1715 New York, New York 10036 Attention: Andrew L. Stidd Telephone No.: (212) 302-5151 Facsimile No.: (212) 302-8767 With a copy to: The Bank of Nova Scotia One Liberty Plaza New York, New York 10006 Attention: Richard Garritt Telephone No.: (212) 225-5026 Facsimile No.: (212) 225-5090 S-4 Amended and Restated Receivables Purchase Agreement THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH, as Gotham Purchaser Agent By: _______________________________________ Name:__________________________________ Title:_________________________________ Address: The Bank of Tokyo-Mitsubishi, Ltd., New York Branch 1251 Avenue of the Americas New York, NY 10020-1104 Attention: Securitization Group Telephone No.: 212-782-6963 Facsimile No.: 212-782-6448 THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH, as Related Committed Purchaser By:_________________________________ Name:_______________________________ Title:______________________________ The Bank of Tokyo-Mitsubishi, Ltd., New York Branch 1251 Avenue of the Americas New York, NY 10020-1104 Commitment $100,000,000 S-5 Amended and Restated Receivables Purchase Agreement THE BANK OF NOVA SCOTIA, as Liberty Street Purchaser Agent and Related Committed Purchaser By: ________________________________________________ Name:___________________________________________ Title:__________________________________________ Address: The Bank of Nova Scotia One Liberty Plaza New York, New York 10006 Attention: Richard Garritt Telephone No.: (212) 225-5026 Facsimile No.: (212) 225-5090 Commitment $100,000,000 S-6 Amended and Restated Receivables Purchase Agreement EXHIBIT I DEFINITIONS As used in the Agreement (including its Exhibits, Schedules and Annexes), the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined). Unless otherwise indicated, all Section, Annex, Exhibit and Schedule references in this Exhibit are to Sections of and Annexes, Exhibits and Schedules to the Agreement. "Administrator" has the meaning set forth in the preamble to the Agreement. "Adverse Claim" means a lien, security interest or other charge or encumbrance, or any other type of preferential arrangement; it being understood that any thereof in favor of the Administrator (for the benefit of the Purchasers ) or the federal government with respect to any Receivable described in clause (a)(ii) of the definition of "Eligible Receivable" shall not constitute an Adverse Claim. "Affected Person" has the meaning set forth in Section 1.7 of the Agreement. "Affiliate" means, as to any Person: (a) any Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person, or (b) who is a director or officer: (i) of such Person or (ii) of any Person described in clause (a), except that, in the case of each Conduit Purchaser, Affiliate shall mean the holder of its capital stock. For purposes of this definition, control of a Person shall mean the power, direct or indirect: (x) to vote 25% or more of the securities having ordinary voting power for the election of directors of such Person, or (y) to direct or cause the direction of the management and policies of such Person, in either case whether by ownership of securities, contract, proxy or otherwise. "Aggregate Discount" at any time, means the sum of the aggregate for each Purchaser of the accrued and unpaid Discount with respect to each such Purchaser's Investment at such time. "Aggregate Investment" means the amount paid to the Seller in respect of the Purchased Interest or portion thereof by each Purchaser pursuant to the Agreement, as reduced from time to time by Collections distributed and applied on account of such Aggregate Investment pursuant to Section 1.4(d) of the Agreement; provided, that if such Aggregate Investment shall have been reduced by any distribution, and thereafter all or a portion of such distribution is rescinded or must otherwise be returned for any reason, such Aggregate Investment shall be increased by the amount of such rescinded or returned distribution as though it had not been made. "Agreement" has the meaning set forth in the preamble to the Agreement. "Assumption Agreement" means an agreement substantially in the form set forth in Annex C to the Agreement. "Attorney Costs" means and includes all reasonable fees and disbursements of any law firm or other external counsel. I-1 "Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101, et seq.), as amended from time to time. "Base Rate" means, for any day, (a) in the case of the Purchaser Group including Gotham, the Gotham Base Rate, (b) in the case of the Purchaser Group including Liberty Street, the Liberty Street Base Rate, and (c) in the case of each other Purchaser Group, shall mean the rate set forth as the Base Rate for such Purchaser Group in the related Purchaser Group Fee Letter. "BBA" means the British Bankers' Association. "Benefit Plan" means any employee benefit pension plan as defined in Section 3(2) of ERISA in respect of which the Seller, any Originator, York or any ERISA Affiliate is, or at any time during the immediately preceding six years was, an "employer" as defined in Section 3(5) of ERISA. "BTMNY" has the meaning set forth in the preamble to the Agreement. "BTM Trust Company" means the Program Administrator. "Business Day" means any day (other than a Saturday or Sunday) on which: (a) banks are not authorized or required to close in New York City, New York and (b) if this definition of "Business Day" is utilized in connection with the Euro-Rate, dealings are carried out in the London interbank market. "Cancelled Distributor" means each of the Obligors listed in the most recently delivered Information Package, with whom no Originator is doing business. "Cancelled Obligor" means an Obligor with whom York or any other Originator has ceased transacting business. "Change in Control" means (a) with respect to Seller, that at any time York shall fail to own, directly or indirectly through one or more wholly-owned Subsidiaries free and clear of any Adverse Claim, 100% of the shares of outstanding voting stock of the Seller on a fully diluted basis, (b) with respect to any Originator other than York, that at any time York shall fail to own, directly or indirectly through one or more wholly-owned Subsidiaries free and clear of any Adverse Claim, 100% of the share of outstanding voting stock of such Originator on a fully diluted basis, and (c) with respect to York, the acquisition by any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) of 20% or more of the shares of outstanding voting stock of York. "Closing Date" means May 17, 2004. "Collections" means, with respect to any Pool Receivable: (a) all funds that are received by any Originator, York, the Seller or the Servicer in payment of any amounts owed in respect of such Receivable (including purchase price, finance charges, interest and all other charges), or that are applied to amounts owed in respect of such Receivable (including insurance payments and net proceeds of the sale or other disposition of repossessed goods or other collateral or I-2 property of the related Obligor or any other Person directly or indirectly liable for the payment of such Pool Receivable and available to be applied thereon), (b) all amounts deemed to have been received pursuant to Section 1.4(e) of the Agreement and (c) all other proceeds of such Pool Receivable. "Commitment" means, with respect to each Related Committed Purchaser, the maximum amount which such Purchaser is obligated to pay hereunder on account of any Purchase, as set forth below its signature to this Agreement or in the Assumption Agreement pursuant to which it became a Purchaser, as such amount may be modified in connection with any subsequent assignment pursuant to Section 6.3(c) or in connection with a change in the Purchase Limit pursuant to Section 1.1(b). "Commitment Percentage" means, for each Related Committed Purchaser in a Purchaser Group, such Related Committed Purchaser's Commitment divided by the total of all Commitments of all Related Committed Purchasers in such Purchaser Group. "Company Note" has the meaning set forth in Section 3.1 of the Purchase and Sale Agreement. "Concentration Percentage" means as to any Obligor which is (a) a Group A Obligor, 16.0%, (b) a Group B Obligor, 16.0%, (c) a Group C Obligor, 8.0%, or (d) a Group D Obligor, 5.0%. "Concentration Reserve" means, on any day, an amount equal to: (a) the Aggregate Investment at the close of business of the Servicer on such date multiplied by (b) (i) the Concentration Reserve Percentage on such date, divided by (ii) 100% minus the Concentration Reserve Percentage on such date. "Concentration Reserve Percentage" means, on any date, the quotient of (i) the greatest of (a) the largest aggregate Outstanding Balance of the Receivables of any single Group A Obligor or Group B Obligor, (b) the sum of the largest aggregate Outstanding Balances of the Receivables of any two Group C Obligors or (c) the sum of the largest aggregate Outstanding Balances of the Receivables of any four Group D Obligors, divided by (ii) the aggregate Outstanding Balance of all Eligible Receivables, on such date. For the purposes of this definition the Outstanding Balance of an Obligor shall exclude the Excess Concentration Amounts for such Obligor. "Conduit Purchasers" means each commercial paper conduit that is a party to the Agreement, as a purchaser, or that becomes a party to the Agreement, as a purchaser pursuant to an Assumption Agreement. "Contract" means, with respect to any Receivable, any and all contracts, understandings, instruments, agreements, leases, invoices, notes or other writings pursuant to which such Receivable arises or that evidence such Receivable or under which an Obligor becomes or is obligated to make payment in respect of such Receivable. "CP Rate" for any Yield Period for any Portion of Investment (a) in the case of the Purchaser Group including Gotham, means the Gotham CP Rate, (b) in the case of the Purchaser I-3 Group including Liberty Street, means the Liberty Street CP Rate and (c) in the case of each other Purchaser Group, shall mean the rate set forth as the CP Rate for such Purchaser Group in the related Purchaser Group Fee Letter. "Credit and Collection Policy" means, as the context may require, those receivables credit and collection policies and practices of each Originator and of York in effect on the date of the Agreement and described in Schedule I to the Agreement, as the same may be modified from time to time in compliance with the Agreement. "Current Days' Sales Outstanding" means, for any calendar month, an amount computed as of the last day of such calendar month equal to: (a) the average of the Outstanding Balance of all Pool Receivables that are not passed their respective due date as of the last day of the most recent three calendar months divided by (b)(i) the average of the aggregate credit sales made by the Originators during most recent three calendar months divided by (ii) 90. "Cut-off Date" has the meaning set forth in the Purchase and Sale Agreement. "Debt" means: (a) indebtedness for borrowed money, (b) obligations evidenced by bonds, debentures, notes or other similar instruments, (c) obligations to pay the deferred purchase price of property or services, (d) obligations as lessee under leases that shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, and (e) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (d). "Default Ratio" means the ratio (expressed as a percentage and rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of the last day of each calendar month by dividing: (a) the aggregate Outstanding Balance of all Pool Receivables that became Defaulted Receivables (other than any Receivable the Obligor of which is an Affiliate of any Originator) during such month excluding Ineligible Elimination Amounts, by (b)(i) at all times during which the Current Days' Sales Outstanding is less than or equal to 45, the aggregate credit sales made by the Originators (other than any sales made to an Obligor which is an Affiliate of any Originator) during the month that is five months before such month and (ii) at all other times, the aggregate credit sales made by the Originators (other than any sales made to an Obligor which is an Affiliate of any Originator) during the month that is six months before such month. "Defaulted Receivable" means a Receivable: (a) as to which any payment, or part thereof, remains unpaid for more than 120 days, in each case from the due date for such payment, or (b) without duplication (i) as to which an Insolvency Proceeding shall have occurred with respect to the Obligor thereof or any other Person obligated thereon or owning any Related Security with respect thereto, (ii) that has been charged-off as uncollectible or (iii) that should have been charged-off as uncollectible pursuant to the Credit and Collection Policy. The "Outstanding Balance" of any Defaulted Receivable I-4 the Obligor of which is not a Cancelled Obligor shall be determined without regard to any credit memos or balances. The "Outstanding Balance" of any Defaulted Receivable the Obligor of which is a Cancelled Obligor shall be determined with regard to any credit memos or balances applicable to such Cancelled Obligor, provided that such credit memos or balances are applied in chronological order beginning with the most current "Outstanding Balances"; provided, however, that if such credit memos or balances exceed the "Outstanding Balances" of such Cancelled Obligor then the excess of such credit memos or balances over such "Outstanding Balances" shall be applied and reported to the "current aging" category as set forth on the Information Package. "Delinquency Ratio" means the ratio (expressed as a percentage and rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of the last day of each calendar month by dividing: (a) the aggregate Outstanding Balance of all Pool Receivables that were Delinquent Receivables (other than any Receivable the Obligor of which is an Affiliate of any Originator) on such day excluding Ineligible Elimination Amounts by (b) the aggregate Outstanding Balance of all Pool Receivables (other than any Receivable the Obligor of which is an Affiliate of any Originator) on such day. "Delinquent Receivable" means a Receivable (a) as to which any payment, or part thereof, remains unpaid for more than 90 days from the due date for such payment or (b) without duplication, which has been (or consistent with the Credit and Collection Policy, would be) classified as a Delinquent Receivable by the applicable Originator. The `Outstanding Balance' of any Delinquent Receivable the Obligor of which is not a Cancelled Obligor shall be determined without regard to any credit memos or balances. The "Outstanding Balance" of any Delinquent Receivable the Obligor of which is a Cancelled Obligor shall be determined with regard to any credit memos or balances applicable to such Cancelled Obligor provided that such credit memos or balances are applied in chronological order beginning with the most current "Outstanding Balances"; provided, however, that if such credit memos or balances exceed the "Outstanding Balances" of such Cancelled Obligor then the excess of such credit memos or balances over such "Outstanding Balances" shall be applied and reported to the "current aging" category as set forth on the Information Package. "Dilution Ratio" means the ratio (expressed as a percentage and rounded to the nearest 1/100th of 1%, with 5/1000th of 1% rounded upward), computed as of the last day of each calendar month by dividing: (a) the aggregate amount of payments made or owed by the Seller pursuant to Section 1.4(e)(i) of the Agreement during such calendar month excluding payments related to Ineligible Elimination Amounts, Specifically Reserved Dilution Amount and amounts reported as non-dilutive credits and rebills on the Information Package, by (b) the aggregate credit sales made by the Originators during the calendar month that is one month prior to such calendar month. "Dilution Reserve" means, on any day, an amount equal to: (a) the Aggregate Investment at the close of business of the Servicer on such date multiplied by (b) (i) the Dilution Reserve Percentage on such date, divided by (ii) 100% minus the Dilution Reserve Percentage on such date. I-5 "Dilution Reserve Percentage" means, on any date that the Servicer has long-term senior unsecured debt ratings as set forth in the grid below, the applicable percentage determined in accordance with the formula indicated under the heading "Dilution Reserve Percentage Clause": YORK RECEIVABLES FUNDING LLC DILUTION RESERVE PERCENTAGE
DILUTION RESERVE PERCENTAGE MOODY'S RATING S&P RATING CLAUSE - ------------------ ------------------ ---------------------------- Better than Baa1 Better than BBB+ (I) Baa1 BBB+ (I) Baa1 BBB (II) Baa1 BBB- (II) Baa1 Lower than BBB- (III) Baa2 BBB+ (II) Baa2 BBB (II) Baa2 BBB- (II) Baa2 Lower than BBB- (III) Baa3 BBB+ (II) Baa3 BBB (II) Baa3 BBB- or Lower (III) Lower than Baa3 BBB+ (III) Lower than Baa3 BBB (III) Lower than Baa3 BBB- (III) Lower than Baa3 Lower than BBB- (III) Not Rated Not Rated (III)
Ratings based on Servicer's long-term unsecured debt ratings. Where: (I) = 10% (II) the greater of (a) 10.00%,or (b) the percentage determined by the following formula: ED x DHR (III) the greater of (a) 10.00% or (b) the percentage determined by the following formula: [[(2.0 x ED) + ((DS-ED) x DS/ED))] x DHR]; provided that, (i) if the Servicer has only one long-term unsecured debt rating, the Servicer may obtain an additional long-term senior unsecured debt rating from a nationally recognized rating agency reasonably acceptable to the Administrative Agent, and until the issuance of such additional rating, the Dilution Reserve Percentage shall be determined by reference to the ratings level which is one ratings level lower than the ratings level of the available rating and (ii) if any rating shall be changed (other than as a result of a change in the rating system of the applicable Rating Agency), such change shall be effective as of the date on which such change is first announced by the applicable Rating Agency. I-6 For the purposes of this definition, the abbreviations set forth in the formulas above shall have the following meanings: ED = the "Expected Dilution," which shall be equal to the 12-month rolling average Dilution Ratio, expressed as a percentage; DS = the "Dilution Spike," which shall be equal to the highest one month Dilution Ratio over the immediately preceding 12 months, expressed as a percentage; and DHR = the "Dilution Horizon Ratio," which shall be equal to the aggregate credit sales made by the Originators (other than sales to Obligors which are Affiliates of any Originator) during the two preceding calendar months divided by the Net Receivables Pool Balance as of the last day of most recent calendar month; provided, however, if the Servicer has a rating of at least BBB- from Standard & Poor's and Baa3 from Moody's, the "Dilution Horizon Ratio" shall be equal to: (i) the aggregate credit sales made by the Originators (other than sales to Obligors which are Affiliates of any Originator) during the preceding calendar month plus (ii) 50% of the aggregate credit sales made by the Originators (other than sales to Obligors which are Affiliates of any Originator) during the penultimate calendar month. "Discount" means with respect to any Purchaser: (a) for any Portion of Investment for any Yield Period with respect to any Purchaser to the extent such Portion of Investment will be funded by such Purchaser during such Yield Period through the issuance of Notes: CPR x I x ED/360 (b) for any Portion of Investment for any Yield Period with respect to any Purchaser to the extent such Portion of Investment will not be funded by such Purchaser during such Yield Period through the issuance of Notes: YR x I x ED/Year + TF where: YR = the Yield Rate, as applicable, for such Portion of Investment for such Yield Period with respect to such Purchaser, I = the Investment with respect to such Portion of Investment during such Yield Period with respect to such Purchaser, CPR = the CP Rate for the Portion of Investment for such Yield Period with respect to such Purchaser, ED = the actual number of days during such Yield Period, I-7 Year = if such Portion of Investment is funded based upon: (a) the Euro-Rate, 360 days, and (b) the Base Rate, 365 or 366 days, as applicable, and TF = the Termination Fee, if any, for the Portion of Investment for such Yield Period with respect to such Purchaser; provided, that no provision of the Agreement shall require the payment or permit the collection of Discount in excess of the maximum permitted by applicable law; and provided further, that Discount for any Portion of Investment shall not be considered paid by any distribution to the extent that at any time all or a portion of such distribution is rescinded or must otherwise be returned for any reason. "Eligible Foreign Obligor" means an Obligor which is: (a) (i) a resident of any country listed on Annex F to the Agreement, (ii) a member of the Organisation for Economic Co-operation and Development (or any successor organization) and (iii) has a short-term foreign currency rating (or, if such country does not have such a short-term foreign currency rating, a long-term foreign currency rating) of at least "A-2" (or "A+") by Standard & Poor's and "P-2" (or "A1") by Moody's; provided, that the Eligible Receivables (to the extent that they satisfy each of the other requirements in the definition of Eligible Receivable) related to such Obligors in the aggregate, shall not exceed 5.00% of the aggregate Outstanding Balance of all other Eligible Receivables at such time; or (b) (i) a Canadian resident, (ii) a member of the Organisation for Economic Co-operation and Development (or any successor organization), and (iii) Canada then maintains a short-term foreign currency rating (or, if Canada does not have such a short-term foreign currency rating, a long-term foreign currency rating) of at least "A-1" (or "A+") by Standard & Poor's and "P-1" (or "A1") by Moody's; provided that Eligible Receivables (to the extent that they satisfy each of the other requirements in the definition of Eligible Receivable), related to such Obligors in the aggregate shall not exceed 5.00% of the aggregate Outstanding Balance of all other Eligible Receivables at such time. "Eligible Receivable" means, at any time, a Pool Receivable: (a) the Obligor of which is: (A)(i) a United States resident or (ii) an Eligible Foreign Obligor, (B) such Receivable results from goods and services sold in and performed in and/or shipped from the United States by the applicable Originator and (C) payment for such goods and services is denominated and payable only in U.S. dollars in the United States and payable to such Originator at a Lock-Box Bank and subject to a Lock-Box Agreement, (D) not a Government Authority; provided, however, that if the Obligor of such Receivable is a Government Authority, such Receivable shall be deemed to satisfy the requirements of this clause (D) to the extent that the sum of aggregate Outstanding Balance of such Receivables at such time is less than or equal to 6.00% of the aggregate Outstanding Balance of all other Eligible Receivables at such time, as determined, without giving effect to this proviso or the provisos to clause (a)(i); provided, further that if a Servicer Downgrade Event exists, the percentage of Receivables the I-8 Obligors of which are Government Authorities described in clause (D) above shall automatically be reduced to zero (0.00%) (it being understood that during the continuance of a Servicer Downgrade Event, if, with respect to any Receivable the Obligor of which is a Government Authority, the Seller and the applicable Originator shall have provided evidence reasonably satisfactory to the Administrator that any such Receivable complies fully with the Federal Assignment of Claims Act and all other similar applicable laws of Governmental Authorities with respect to any transfer or pledge of such Receivable have been fully complied with and such Receivable otherwise satisfies the requirements of this definition, such Receivable shall be deemed to satisfy the requirements of this clause (D) upon written notice thereof by the Administrator; (iii) not subject to any action of the type described in paragraph (f) of Exhibit V to the Agreement; and (iv) not an Affiliate of York (for the avoidance of doubt, after each of the conditions set forth in Section (q) of paragraph 1 of Exhibit IV are satisfied, no foreign receivable shall be an "Eligible Receivable" hereunder), (b) that is denominated and payable only in U.S. dollars in the United States, (c) that does not have a stated maturity which is more than 60 days after the original invoice date of such Receivable; provided, however, that up to 10.00% of the aggregate Outstanding Balance of all Receivables may have a stated maturity which is more than 60 days but not more than 180 days from the original invoice date of such Receivable; provided, further, that up to 10.00% of the aggregate Outstanding Balance of all Receivables may have a stated maturity which is more than 180 days but not more than 360 days from the original invoice date of such Receivables and such Receivables are covered by an insurance policy in form and substance acceptable to the Purchasers, (d) that arises under a duly authorized Contract for the sale and delivery of goods and services in the ordinary course of an Originator's business, (e) that arises under a duly authorized Contract that is in full force and effect and that is a legal, valid and binding obligation of the related Obligor, enforceable against such Obligor in accordance with its terms, (f) that conforms in all material respects with all applicable laws, rulings and regulations in effect, (g) that is not the subject of any asserted dispute, offset, hold back defense, Adverse Claim or other claim, (h) that satisfies all applicable requirements of the applicable Credit and Collection Policy, (i) that has not been modified, waived or restructured since its creation, except as permitted pursuant to Section 4.2 of the Agreement, (j) in which the Seller owns good and marketable title, free and clear of any Adverse Claims, and that is freely assignable by the Seller (including without any consent of the related Obligor), I-9 (k) for which the Administrator (for the benefit of each Purchaser) shall have a valid and enforceable undivided percentage ownership or security interest, to the extent of the Purchased Interest, and a valid and enforceable first priority perfected security interest therein and in the Related Security and Collections with respect thereto, in each case free and clear of any Adverse Claim, (l) that constitutes an account as defined in the UCC, and that is not evidenced by instruments or chattel paper, (m) that is not a Defaulted Receivable or a Delinquent Receivable, (n) for which none of the Originator thereof, the Seller and the Servicer has established any offset arrangements with the related Obligor, (o) for which Defaulted Receivables of the related Obligor do not exceed 25% of the Outstanding Balance of all such Obligor's Receivables, (p) that represents amounts earned and payable by the Obligor that are not subject to the performance of additional services by the Originator or Servicer thereof, including without limitation, any progress billed Receivables, (q) the Obligor of which is neither a Cancelled Distributor, nor Rheem Manufacturing Company or any of its successors, (r) does not have "pay-when-pay" or other similar terms where the related original due date is not a date certain set forth in the related Contract; provided however, that so long as such Receivable meets all of the other requirements of this definition, up to 2.00% of the aggregate Outstanding Balance of all Eligible Receivables may be "Eligible Receivables" without satisfying this clause (r), and (s) that represents amounts payable by the Obligor that are not related to maintenance billings that are billed in advance of the related service period or performance as set forth on the Servicer's books and records; provided however so long as a Receivable meets all of the other requirements of this definition, up to 4.00% of the aggregate Outstanding Balance of all Eligible Receivables may be "Eligible Receivables" without satisfying this clause (s). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections. "ERISA Affiliate" means: (a) any corporation that is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Internal Revenue Code) as the Seller, any Originator or York, (b) a trade or business (whether or not incorporated) under common control (within the meaning of Section 414(c) of the Internal Revenue Code) with the Seller, any Originator or York, or (c) a member of the same affiliated service group (within the I-10 meaning of Section 414(m) of the Internal Revenue Code) as the Seller, any Originator, any corporation described in clause (a) or any trade or business described in clause (b). "Euro-Rate" means with respect to any Yield Period, the interest rate per annum determined by the Administrator by dividing (the resulting quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate of interest determined by the applicable Purchaser Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the average of the London interbank market offered rates for U.S. dollars quoted by the BBA as set forth on Dow Jones Markets Service (formerly known as Telerate) (or appropriate successor or, if BBA or its successor ceases to provide display page 3750 (or such other display page on the Dow Jones Markets Service system as may replace display page 3750) at or about 11:00 a.m. (London time) on the Business Day which is two (2) Business Days prior to the first day of such Yield Period for an amount comparable to the Portion of Investment to be funded at the Yield Rate and based upon the Euro-Rate during such Yield Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed by the following formula: Average of London interbank offered rates quoted by BBA as shown on Dow Jones Markets Service display page 3750 or appropriate successor Euro-Rate = -------------------------------------------------- 1.00 - Euro-Rate Reserve Percentage where "Euro-Rate Reserve Percentage" means, the maximum effective percentage in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including without limitation, supplemental, marginal, and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as "Eurocurrency Liabilities"). The Euro-Rate shall be adjusted with respect to any Portion of Investment funded at the Yield Rate and based upon the Euro-Rate that is outstanding on the effective date of any change in the Euro-Rate Reserve Percentage as of such effective date. The applicable Purchaser Agent shall give prompt notice to the Seller of the Euro-Rate as determined or adjusted in accordance herewith (which determination shall be conclusive absent manifest error). "Excess Concentration" means, on any date, the sum of the amounts by which the Outstanding Balance of Eligible Receivables of each Obligor then in the Receivables Pool exceeds an amount equal to: (a) the applicable Concentration Percentage for such Obligor multiplied by (b) the Outstanding Balance of all Eligible Receivables, on such date. "Excluded Foreign Receivables" each Receivable, the Obligor of which is not a United States resident to the extent originated from and after the cut-off date identified in the notice under Section (q) of section 1 of Exhibit IV. "Exiting Notice" has the meaning set forth in Section 1.4(b)(ii). "Exiting Purchaser" has the meaning set forth in Section 1.4(b)(ii). I-11 "Facility Termination Date" means the earliest to occur of: (a) with respect to each Purchaser, May 16, 2005, subject to any extension pursuant to Section 1.10 of the Agreement (it being understood that if any such Purchaser does not extend its Commitment hereunder then the Purchase Limit shall be reduced ratably with respect to the Purchasers in each Purchaser Group by an amount equal to the Commitment of such Exiting Purchaser and the Commitment Percentages and Group Commitments of the Purchasers within each Purchaser Group shall be appropriately adjusted), (b) the date determined pursuant to Section 2.2 of the Agreement, (c) the date the Purchase Limit reduces to zero pursuant to Section 1.1(b) of the Agreement, (d) with respect to each Purchaser Group, the date that the commitments of all of the Liquidity Providers terminate under the related Liquidity Agreements, (e) with respect to each Purchaser Group, the date that the commitment, of all of the Related Committed Purchasers of such Purchaser Group terminate pursuant to Section 1.10 and (f) the failure to cause the amendment or modification of any Transaction Document or related opinion as required by Moody's or Standard & Poor's and such failure shall continue for 10 Business Days after such amendment is initially requested. "Federal Funds Rate" means, for any day, the per annum rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)." If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m. Quotations") for such day under the caption "Federal Funds Effective Rate." If on any relevant day the appropriate rate is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean as determined by the applicable Purchaser Agent of the rates for the last transaction in overnight Federal funds arranged before 9:00 a.m. (New York time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by such Purchaser Agent. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System, or any entity succeeding to any of its principal functions. "Fees" means the fees payable by the Seller to each Purchaser Group pursuant to the applicable Purchaser Group Fee Letter. "Funding Plan" means, a written report delivered by the Seller (or the Servicer on its behalf) to the Administrator and each Purchaser Agent on or before the first Business Day of each calendar month setting forth each Business Day during such calendar month that the Seller anticipates either making a purchase (but not a reinvestment) in accordance with and subject to the terms and provisions of the Agreement (including Section 1.1(a)) or causing a reduction in the Aggregate Investment in accordance with and pursuant to the terms and provisions of the Agreement (including Section 1.4(f)); provided, that in no event shall the total number of Business Days for such anticipated changes set forth any Funding Plan on which either a purchase or a reduction is anticipated exceed four. "GAAP" means the generally accepted accounting principles and practices in the United States, consistently applied. I-12 "Gotham" has the meaning set forth in the preamble to the Agreement. "Gotham Base Rate" means, in the case of Gotham or any Purchaser in its Purchaser Group, for any day, a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the higher of: (a) the rate of interest in effect for such day as publicly announced from time to time by BTM Trust Company as its "prime rate" in the United States, such rate to change as and when such designated rate changes (this "prime rate" is not intended to be the lowest rate of interest charged by BTM Trust Company in connection with extensions of credit to debtors), and (b) 0.50% per annum above the latest Federal Funds Rate determined by its Purchaser Agent. "Gotham CP Rate" means, with respect to Gotham for any Yield Period with respect to any Portion of Investment, the per annum rate calculated by its Purchaser Agent to reflect Gotham's cost of financing such Portion of Investment, taking into account the "weighted average cost" (as defined below) related to the issuance of Gotham's Notes that are allocated, in whole or in part, by Gotham (or by its Purchaser Agent) to fund or maintain such Portion of Investment (and which may also be allocated in part to the funding of other Portions of Investment hereunder or of other assets of Gotham); provided, however, that if any component of such rate is a discount rate, in calculating the "Gotham CP Rate" for such Portion of Investment for such Yield Period, Gotham shall for such component use the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum. As used in this definition, Gotham's "weighted average cost" shall consist of (x) the actual interest rate (or discount) paid to purchasers of Gotham's Notes, together with the commissions of placement agents and dealers in respect of such Notes, to the extent such commissions are allocated, in whole or in part, to such Notes by Gotham (or by its Purchaser Agent) and (y) any incremental carrying costs incurred with respect to Gotham's Notes maturing on dates other than those on which corresponding funds are received by Gotham. Notwithstanding the foregoing, the "Gotham CP Rate" for any day while a Termination Event exists shall be an interest rate equal to 2% above the Gotham Base Rate in effect on such day. "Gotham Yield Rate" for any Yield Period for any Portion of Investment of the Purchased Interest in the case of Gotham or any Purchaser in its Purchaser Group, means an interest rate per annum equal to: (a) the rate set forth as the "Applicable Margin" in the Purchaser Group Fee Letter relating to Gotham above the Euro-Rate for such Yield Period, or (b) if requested by the Seller, the Base Rate for such Yield Period; provided, however, that in the case of: (i) any Yield Period on or before the first day of which the Administrator shall have been notified by any Purchaser within the Gotham Purchaser Group or other Program Support Provider that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other Governmental Authority asserts that it is unlawful, for such Person, to fund any Euro- I-13 Rate Portion of Investment (and such Person shall not have subsequently notified the Administrator that such circumstances no longer exist), (ii) any Yield Period of one to (and including) 29 days, (iii) any Yield Period as to which the Administrator does not receive notice before noon (New York City time) on the third Business Day preceding the first day of such Yield Period that the Seller desires that the related Portion of Investment be a Euro-Rate Portion of Investment, or (iv) any Yield Period relating to a Portion of Investment that is less than $5,000,000, the "Yield Rate" for each such Yield Period shall be an interest rate per annum equal to the Base Rate in effect on each day of such Yield Period. The "Yield Rate" for any day while a Termination Event exists shall be an interest rate equal to 2.5% per annum above the applicable Base Rate in effect on such day. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any body or entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any court, and any Person owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Group A Obligor" means an Obligor with a short-term senior unsecured indebtedness rating (or, if such Obligor does not have such a short-term rating, a long-term senior unsecured indebtedness rating) of at least "A-1" (or "A+") by Standard & Poor's and "P-1" (or "A1") by Moody's. "Group B Obligor" means an Obligor with a short-term senior unsecured indebtedness rating (or, if such Obligor does not have such a short-term rating, a long-term senior unsecured indebtedness rating) of at least "A-2" (or "BBB+") by Standard & Poor's and "P-2" (or "Baa1") by Moody's, that is not a Group A Obligor. "Group C Obligor" means an Obligor with a short-term senior unsecured indebtedness rating (or, if such Obligor does not have such a short-term rating, a long-term senior unsecured indebtedness rating) of at least "A-3" (or "BBB-") by Standard & Poor's and "P-3" (or "Baa3") by Moody's, that is not a Group A Obligor or a Group B Obligor. "Group Commitment" means with respect to any Purchaser Group the aggregate of the Commitments of each Purchaser within such Purchaser Group. "Group D Obligor" means an Obligor which is not a Group A Obligor, a Group B Obligor, a Group C Obligor or an Eligible Foreign Obligor. "Group Investment" means with respect to any Purchaser Group, an amount equal to the aggregate of all Investments of the Purchasers within such Purchaser Group. I-14 "Indemnified Amounts" has the meaning set forth in Section 3.1 of the Agreement. "Indemnified Party" has the meaning set forth in Section 3.1 of the Agreement. "Independent Director" has the meaning set forth in paragraph 3(c) of Exhibit IV to the Agreement. "Ineligible Elimination Amounts" means amounts which are reported by the Servicer as inputs to the Information Package as credit memos or aged invoices which relate to Receivables, the Obligors of which are Cancelled Distributors. "Information Package" means a report, in substantially the form of Annex A to the Agreement (with appropriate additions and adjustments as may be requested by the Administrator or any Purchaser Agent, as such requested additions or adjustments are reasonably available or determinable by the Servicer), including all supporting input information, source data information, worksheets and calculations furnished to the Administrator and each Purchaser Group Agent pursuant to the Agreement. "Insolvency Proceeding" means: (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors of a Person or, composition, marshaling of assets for creditors of a Person, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors, in each of cases (a) and (b) undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of the Internal Revenue Code also refer to any successor sections. "Investment" means with respect to any Purchaser the amount paid to the Seller by such Purchaser pursuant to the Agreement, or such amount divided or combined in accordance with the Agreement, in each case reduced from time to time by Collections distributed and applied on account of such Investment pursuant to Section 1.4(d) of the Agreement; provided, that if such Investment shall have been reduced by any distribution and thereafter all or a portion of such distribution is rescinded or must otherwise be returned for any reason, such Investment shall be increased by the amount of such rescinded or returned distribution as though it had not been made. "Liberty Street" has the meaning set forth in the preamble to the Agreement. "Liberty Street Base Rate" means, in the case of Liberty Street or any Purchaser in its Purchaser Group, for any day, a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the higher of: (a) the rate of interest in effect for such day as publicly announced from time to time by BNS in New York, New York as its "reference rate". Such "reference rate" is set by BNS based I-15 upon various factors, including BNS's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such announced rate, and (b) 0.50% per annum above the latest Federal Funds Rate. "Liberty Street CP Rate" means, with respect to Liberty Street for any Yield Period with respect to any Portion of Investment, the per annum rate equivalent to the "weighted average cost" (as defined below) related to the issuance of Liberty Street's Notes that are allocated, in whole or in part, by Liberty Street (or by its Purchaser Agent) to fund or maintain such Portion of Investment (and which may also be allocated in part to the funding of other Portions of Investment hereunder or of other assets of Liberty Street); provided, however, that if any component of such rate is a discount rate, in calculating the "Liberty Street CP Rate" for such Portion of Investment for such Yield Period, Liberty Street shall for such component use the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum. As used in this definition, Liberty Street's "weighted average cost" shall consist of (x) the actual interest rate (or discount) paid to purchasers of Liberty Street's Notes, together with the commissions of placement agents and dealers in respect of such Notes, to the extent such commissions are allocated, in whole or in part, to such Notes by Liberty Street (or by its Purchaser Agent) and (y) any incremental carrying costs incurred with respect to Liberty Street's Notes maturing on dates other than those on which corresponding funds are received by Liberty Street. Notwithstanding the foregoing, the "Liberty Street CP Rate" for any day while a Termination Event exists shall be an interest rate equal to 2% above the Base Rate in effect on such day. "Liberty Street Yield Rate" for any Yield Period for any Portion of Investment of the Purchased Interest in the case of Liberty Street or any Purchaser in its Purchaser Group, means an interest rate per annum equal to: (a) the rate set forth as the "Applicable Margin" in the Purchaser Group Fee Letter relating to Liberty Street above the Euro-Rate for such Yield Period, or (b) if requested by the Seller the Base Rate for such Yield Period; provided, however, that in the case of: (i) any Yield Period on or before the first day of which BNS shall have been notified by any Purchaser within the Liberty Street Purchaser Group or other Program Support Provider that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other Governmental Authority asserts that it is unlawful, for such Person, to fund any Euro-Rate Portion of Investment (and such Person shall not have subsequently notified BNS that such circumstances no longer exist), (ii) any Yield Period of one to (and including) 29 days, (iii) any Yield Period as to which BNS does not receive notice before noon (New York City time) on the third Business Day preceding the first day of such Yield Period that the Seller desires that the related Portion of Investment be a Euro-Rate Portion of Investment, or I-16 (iv) any Yield Period relating to a Portion of Investment that is less than $5,000,000, the "Yield Rate" for each such Yield Period shall be an interest rate per annum equal to the Base Rate in effect on each day of such Yield Period. The "Yield Rate" for any day while a Termination Event exists shall be an interest rate equal to 2% per annum above the applicable Base Rate in effect on such day. "Liquidity Agent" means each of the banks acting as agent for the various Liquidity Banks under each Liquidity Agreement. "Liquidity Agreement" means any agreement entered into in connection with this Agreement pursuant to which a Liquidity Provider agrees to make purchases or advances to, or purchase assets from, any Conduit Purchaser in order to provide liquidity for such Conduit Purchaser's Purchases. "Liquidity Provider" means each bank or other financial institution that provides liquidity support to any Conduit Purchaser pursuant to the terms of a Liquidity Agreement. "Lock-Box Account" means an account in the name of the Seller and maintained by the Seller at a bank or other financial institution for the purpose of, directly or indirectly, receiving Collections. "Lock-Box Agreement" means (i) with respect to any lock-box agreement executed prior to the Closing Date, an agreement, among, inter alia, each applicable Originator, the Seller, the Servicer, the Administrator and a Lock-Box Bank and (ii) with respect to any lock-box agreement executed on or after the Closing Date, an agreement, among, inter alia, each Originator, the Seller, the Servicer, the Administrator and a Lock-Box Bank. "Lock-Box Bank" means any of the banks or other financial institutions holding one or more Lock-Box Accounts. "Loss Horizon" (a) (i) at all times during which the Current Days' Sales Outstanding is less than or equal to 45, the aggregate credit sales (other than sales made to an Obligor which is an Affiliate of any Originator) made by the Originators during the five most recent calendar months, and (ii) at all other times, the aggregate credit sales (other than sales made to an Obligor which is an Affiliate of any Originator) made by the Originators during the six most recent calendar months divided by (b) the Net Receivables Pool Balance as of such date. "Loss Reserve" means, on any date, an amount equal to (a) the Aggregate Investment at the close of business of the Servicer on such date multiplied by (b) (i) the Loss Reserve Percentage on such date divided by (2) 100% minus the Loss Reserve Percentage on such date. "Loss Reserve Percentage" means, on any date, the greater of, (a) 15.0% and (b) the product of (i) 2 times (ii) the highest average of the Default Ratios for any three consecutive calendar months during the twelve most recent calendar months multiplied by (iii) the Loss Horizon. I-17 "Majority Purchasers" means, at any time, Purchasers whose Commitments aggregate more than 66.67% of the aggregate of the Commitments of all Purchasers; provided, however, that so long as any Purchaser's Commitment is greater than 50% of the aggregate Commitments, then "Majority Purchasers" shall mean a minimum of two Purchasers whose Commitments aggregate more than 50% of the aggregate Commitments. "Material Adverse Effect" means, relative to any Person with respect to any event or circumstance, a material adverse effect on: (a) the assets, operations, business or financial condition of such Person. (b) the ability of any of such Person to perform its obligations under the Agreement or any other Transaction Document to which it is a party, (c) the validity or enforceability of any other Transaction Document, or the validity, enforceability or collectibility of a material portion of the Pool Receivables, or (d) the status, perfection, enforceability or priority of any Purchaser's or the Seller's interest in the Pool Assets. "Moody's" means Moody's Investors Service, Inc. "Net Receivables Pool Balance" means, at any time: (a) the Outstanding Balance of Eligible Receivables then in the Receivables Pool minus (b) the sum of (i) the Excess Concentration and (ii) Specifically Reserved Dilution Amount; provided that such calculation shall exclude the Receivables for which the related Obligor has a net credit balance with respect to such Obligor's Eligible Receivables. "Notes" means short-term promissory notes issued, or to be issued, by each Conduit Purchaser to fund its investments in accounts receivable or other financial assets. "Obligor" means, with respect to any Receivable, the Person obligated to make payments pursuant to the Contract relating to such Receivable. "Original Agreement" has the meaning set forth in the preliminary statements of the Agreement. "Original Agreement Outstanding Amounts" has the meaning set forth in the preliminary statements of the Agreement. "Originator" has the meaning set forth in the Purchase and Sale Agreement. "Originator Assignment Certificate" means each assignment, in substantially the form of Exhibit C to the Purchase and Sale Agreement, evidencing Seller's ownership of the Receivables generated by Originator, as the same may be amended, supplemented, amended and restated, or otherwise modified from time to time in accordance with the Purchase and Sale Agreement. I-18 "Outstanding Balance" of any Receivable at any time means the then outstanding principal balance thereof. "Payment Date" has the meaning set forth in Section 2.2 of the Purchase and Sale Agreement. "Performance Guaranty" means the Amended and Restated Performance Guaranty, dated as of the Closing Date, by York in favor of the Administrator, on behalf of the Purchasers, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof. "Pool Assets" has the meaning set forth in Section 1.2(d) of the Agreement. "Pool Receivable" means a Receivable in the Receivables Pool. "Portion of Investment" means, with respect to any Purchaser and its related Investment, the portion of such Investment being funded or maintained by such Purchaser by reference to a particular interest rate basis. "Program Administration Agreement" means that certain management agreement between Gotham and BTM Trust Company governing certain aspects of the administration of Gotham's commercial paper facility. "Program Administrator" means Bank of Tokyo-Mitsubishi Trust Company, a New York corporation and its successors under the Program Administration Agreement. "Program Support Agreement" means and includes any Liquidity Agreement and any other agreement entered into by any Program Support Provider providing for: (a) the issuance of one or more letters of credit for the account of any Conduit Purchaser, (b) the issuance of one or more surety bonds for which the such Conduit Purchaser is obligated to reimburse the applicable Program Support Provider for any drawings thereunder, (c) the sale by such Conduit Purchaser to any Program Support Provider of the Purchased Interest (or portions thereof) maintained by such Conduit Purchaser and/or (d) the making of loans and/or other extensions of credit to any Conduit Purchaser in connection with such Conduit Purchaser's securitization program contemplated in the Agreement, together with any letter of credit, surety bond or other instrument issued thereunder (but excluding any discretionary advance facility provided by the Administrator). "Program Support Provider" means and includes with respect to each Conduit Purchaser any Liquidity Provider and any other Person (other than any customer of such Conduit Purchaser) now or hereafter extending credit or having a commitment to extend credit to or for the account of, or to make purchases from, such Conduit Purchaser pursuant to any Program Support Agreement. I-19 "Purchase" is defined in Section 1.1(a). "Purchase and Sale Agreement" means the Purchase and Sale Agreement, dated as of December 21, 2001, among the Seller and the Originators, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "Purchase and Sale Indemnified Amounts" has the meaning set forth in Section 9.1 of the Purchase and Sale Agreement. "Purchase and Sale Indemnified Party" has the meaning set forth in Section 9.1 of the Purchase and Sale Agreement. "Purchase and Sale Termination Date" has the meaning set forth in Section 1.4 of the Purchase and Sale Agreement. "Purchase and Sale Termination Event" has the meaning set forth in Section 8.1 of the Purchase and Sale Agreement. "Purchase Date" means the date of which a Purchase or a reinvestment is made pursuant to the Agreement. "Purchase Facility" has the meaning set forth in Section 1.1 of the Purchase and Sale Agreement. "Purchase Limit" means $200,000,000, as such amount may be reduced pursuant to Section 1.1(b) of the Agreement. References to the unused portion of the Purchase Limit shall mean, at any time, the Purchase Limit minus the then outstanding Aggregate Investment. "Purchase Price" has the meaning set forth in Section 2.1 of the Purchase and Sale Agreement. "Purchase Report" has the meaning set forth in Section 2.2 of the Purchase and Sale Agreement. "Purchased Interest" means, at any time, the undivided percentage ownership interest in: (a) each and every Pool Receivable now existing or hereafter arising, (b) all Related Security with respect to such Pool Receivables and (c) all Collections with respect to, and other proceeds of, such Pool Receivables and Related Security. Such undivided percentage interest shall be computed as: Aggregate Investment + Total Reserves ----------------------------------------------- Net Receivables Pool Balance The Purchased Interest shall be determined from time to time pursuant to Section 1.3 of the Agreement. "Purchaser" means each Conduit Purchaser and/or each Related Committed Purchaser, as applicable. I-20 "Purchaser Agent" means each Person acting as agent on behalf of a Purchaser Group and designated as a Purchaser Agent for such Purchaser Group on the signature pages to the Agreement or any other Person who becomes a party to this Agreement as a Purchaser Agent pursuant to an Assumption Agreement or a Transfer Supplement. "Purchaser Group" means, for each Conduit Purchaser, such Conduit Purchaser, its Related Committed Purchasers and its related Purchaser Agent. "Purchaser Group Fee Letter" has the meaning set forth in Section 1.5 of the Agreement. "Purchasers' Share" of any amount means such amount multiplied by the Purchased Interest at the time of determination. "Ratable Share" means, for each Purchaser Group, such Purchaser Group's aggregate Commitments divided by the aggregate Commitments of all Purchaser Groups. "Rating Agency" means each of Standard & Poor's and Moody's. "Rating Agency Condition" means, with respect to any material event or occurrence, receipt by the Administrator (or the applicable Purchaser Agent) of written confirmation from each of Standard & Poor's and Moody's that such event or occurrence shall not cause the rating on the then outstanding Notes of any applicable Conduit Purchaser to be downgraded or withdrawn. "Receivable" means any indebtedness and other obligations (whether or not earned by performance) owed to the Seller or any Originator by, or any right of the Seller or any Originator to payment from or on behalf of, an Obligor (other than (i) any YorkSource Receivables, (ii) only after each of the conditions set forth in clause (q) of paragraph 1 of Exhibit IV the Agreement have been satisfied, Excluded Foreign Receivables and any other foreign receivables included at the time of such Take-Out Securitization pursuant to and in accordance with such clause (q), or (iii) such Originator's "Miami Export Portfolio" relating to its Latin America operations and individuals on their books and records under the indicator "Company 810"), whether constituting an account, chattel paper, instrument or general intangible, arising in connection with property or goods that have been or are to be sold or otherwise disposed of, or services rendered or to be rendered by an Originator, and includes the obligation to pay any finance charges, fees and other charges with respect thereto. Indebtedness and other obligations arising from any one transaction, including indebtedness and other obligations represented by an individual invoice or agreement, shall constitute a Receivable separate from a Receivable consisting of the indebtedness and other obligations arising from any other transaction. "Receivables Pool" means, at any time, all of the then outstanding Receivables purchased or otherwise acquired by the Seller pursuant to the Purchase and Sale Agreement prior to the Facility Termination Date. "Related Committed Purchaser" means each Person listed as such (and its respective Commitment) for each Conduit Purchaser as set forth on the signature pages of the Agreement or in any Assumption Agreement or Transfer Supplement. I-21 "Related Rights" has the meaning set forth in Section 1.1 of the Purchase and Sale Agreement. "Related Security" means, with respect to any Receivable: (a) all of the Seller's and the Originator thereof's interest in any goods (including returned goods), and documentation of title evidencing the shipment or storage of any goods (including returned goods), relating to any sale giving rise to such Receivable, (b) all instruments and chattel paper that may evidence such Receivable, (c) all other security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all UCC financing statements or similar filings relating thereto, and (d) all of the Seller's and the Originator thereof's rights, interests and claims under the Contracts and all guaranties, indemnities, insurance, letters of credit and other agreements (including the related Contract) or arrangements of whatever character from time to time supporting or securing payment of such Receivable or otherwise relating to such Receivable, whether pursuant to the Contract related to such Receivable or otherwise. "Seller" has the meaning set forth in the preamble to the Agreement. "Seller's Share" of any amount means the greater of: (a) $0 and (b) such amount minus the product of (i) such amount multiplied by (ii) the Purchased Interest. "Servicer" has the meaning set forth in the preamble to the Agreement. "Servicer Downgrade Event" means either a withdrawal of York's long-term senior unsecured debt rating by Standard & Poor's or Moody's or the reduction of such rating below "BBB-" by Standard & Poor's or below "Baa3" by Moody's. "Servicing Fee" shall mean the fee referred to in Section 4.6 of the Agreement. "Settlement Date" means (a) prior to the Facility Termination Date the 23rd calendar day of each calendar month or if such day is not a Business Day the next succeeding Business Day and (b) on and after the Facility Termination Date, each day selected from time to time by the Administrator (it being understood that the Administrator may select such Settlement Date to occur as frequently as daily), or in the absence of any such selection, the day which would be the Settlement Date for the Portion of Investment pursuant to clause (a) of this definition; provided, that the initial Settlement Date shall be the Closing Date. "Simple Majority" means, at any time, Purchasers whose Commitments aggregate 50% or more of the aggregate of the Commitments of all Purchasers; provided, however, that so long as any Purchaser's Commitment is greater than 50% but less than 100% of the aggregate I-22 Commitments, then "Simple Majority" shall mean a minimum of two Purchasers whose Commitments aggregate more than 50% of the aggregate Commitments. "Solvent" means, with respect to any Person at any time, a condition under which: (a) the fair value and present fair saleable value of such Person's total assets is, on the date of determination, greater than such Person's total liabilities (including contingent and unliquidated liabilities) at such time; (b) the fair value and present fair saleable value of such Person's assets is greater than the amount that will be required to pay such Person's probable liability on its existing debts as they become absolute and matured ("debts," for this purpose, includes all legal liabilities, whether matured or unmatured, liquidated or unliquidated, absolute, fixed, or contingent); (c) such Person is and shall continue to be able to pay all of its liabilities as such liabilities mature; and (d) such Person does not have unreasonably small capital with which to engage in its current and in its anticipated business. For purposes of this definition: (A) the amount of a Person's contingent or unliquidated liabilities at any time shall be that amount which, in light of all the facts and circumstances then existing, represents the amount which can reasonably be expected to become an actual or matured liability; (B) the "fair value" of an asset shall be the amount which may be realized within a reasonable time either through collection or sale of such asset at its regular market value; (C) the "regular market value" of an asset shall be the amount which a capable and diligent business person could obtain for such asset from an interested buyer who is willing to Purchase such asset under ordinary selling conditions; and (D) the "present fair saleable value" of an asset means the amount which can be obtained if such asset is sold with reasonable promptness in an arm's-length transaction in an existing and not theoretical market. "Specifically Reserved Dilution Amount" means, at any time, the sum of (A) the greater of (i) the UPG Cash Discount Reserve and (ii) an amount equal to the product of (x) 0.008 and (y) the aggregate credit sales made by the Unitary Products Group segment of York in the most recent calendar month; (B) the greater of (i) the UPG Co-op Advertising Reserve and (ii) an amount equal to the product of (x) 0.01 and (y) the aggregate credit sales made by the Unitary Products Group segment of York in the most recent I-23 calendar month; (C) the greater of (i) the UPG Volume Rebates Reserve and (ii) an amount equal to the product of (x) .002 and (y) the aggregate credit sales made by the Unitary Products Group segment of York in the most recent calendar month; (D) the greater of (i) the York Refrigeration Group Rebate Reserve and (ii) an amount equal to the product of (x) 0.0225 and (y) the aggregate credit sales made by the York Refrigeration Group segment of York in the most recent calendar month; and (E) the UPG Price Discount Matrix Reserve; it being understood that in each case, such other factor as reasonably determined by York with the consent of the Purchasers, the Purchaser Agents and the Administrator may be used in lieu of the specific factor stated herein. "Standard & Poor's" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc. "Subsidiary" means, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock of each class or other interests having ordinary voting power (other than stock or other interests having such power only by reason of the happening of a contingency) to elect a majority of the Board of Directors or other managers of such entity are at the time owned, or management of which is otherwise controlled: (a) by such Person, (b) by one or more Subsidiaries of such Person or (c) by such Person and one or more Subsidiaries of such Person. "Take Out Securitization" means, subject to Section (q) of paragraph 1 of Exhibit IV, any asset securitization, secured loan, receivables sale or similar transaction undertaken by the Seller with a third party (excluding any Originator) involving foreign receivables (and the Related Security with respect thereto), other than one pursuant to the Transaction Documents; provided, that the effective date of any such Take Out Securitization shall occur on the last day of a monthly accounting period and; provided further that Seller concurrently notifies the Originators that foreign receivables shall no longer be acquired by it under the Purchase and Sale Agreement as of the cut-off date specified in the notice delivered under Section (q) of paragraph 1 of Exhibit IV. "Tangible Net Worth" means, with respect to any Person, the tangible net worth of such Person as determined in accordance with GAAP. "Termination Day" means: (a) each day on which the conditions set forth in Section 2 of Exhibit II to the Agreement are not satisfied or (b) each day that occurs on or after the Facility Termination Date. "Termination Event" has the meaning specified in Exhibit V to the Agreement. "Termination Fee" means, for any Yield Period, with respect to any Purchaser, the amount, if any, by which: (a) the additional Discount related to such Purchaser's Investment (calculated without taking into account any Termination Fee or any shortened duration of such Yield Period) that would have accrued during such Yield Period on the reductions of Investment relating to such Yield Period had such reductions not been made, exceeds (b) the income, if any, received by such Purchaser from investing the proceeds of such reductions of Investment, as determined by the such Purchaser's Purchaser Agent, which determination shall be binding and conclusive for all purposes, absent manifest error. "Total Reserves" means, at any time, the sum of the Yield Reserve and the greater of (a) the sum of the Loss Reserve and the Dilution Reserve, or (b) the Concentration Reserve. I-24 "Transaction Documents" means the Agreement, the Lock-Box Agreements, each Purchaser Group Fee Letter, the Purchase and Sale Agreement, the Performance Guaranty and all other certificates, instruments, UCC financing statements, reports, notices, agreements and documents executed or delivered under or in connection with any of the foregoing, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with the Agreement. "Transfer Supplement" has the respective meanings set forth in Sections 6.3(c) and 6.3(e). "Turnover Rate" means, for any calendar month, an amount computed as of the last day of such calendar month equal to: (a) the Outstanding Balance of all Pool Receivables as of the last day of the most recent calendar month, divided by (b) the quotient of (i) the aggregate credit sales made by the Originators during the three calendar months ended on the last day of such calendar month, divided by (ii) 3. "UCC" means the Uniform Commercial Code as from time to time in effect in the applicable jurisdiction. "Unmatured Purchase and Sale Termination Event" means any event which, with the giving of notice or lapse of time, or both, would become a Purchase and Sale Termination Event. "Unmatured Termination Event" means an event that, with the giving of notice or lapse of time, or both, would constitute a Termination Event. "UPG Cash Discount Reserve" means, at any time, the greater of (a) the balance as of the end of the most recent calendar month of reserves or liabilities maintained on the books and records of the Unitary Products Group segment of York or the Servicer in the ordinary course of business according to policies consistently applied and reported on the Information Package related to, or in anticipation of, cash discounts affecting the Receivables; or (b) the highest amount of credits issued in any calendar month over the immediately preceding three calendar months related to such cash discounts credits. "UPG Co-op Advertising Reserve" means, at any time, the greater of (a) the balance as of the beginning of the most recent calendar month of reserves or liabilities maintained on the books and records of the Unitary Products Group segment of York or the Servicer in the ordinary course of business according to policies consistently applied and reported on the Information Package related to, or in anticipation of, co-op advertising programs affecting the Receivables; or (b) the amount of credits issued in the most recent calendar month related to such co-op advertising programs. "UPG Price Discount Matrix Reserve" means, at any time, the greater of (a) the balance as of the end of the most recent calendar month of reserves or liabilities maintained on the books and records of the Unitary Products Group segment of York or the Servicer in the ordinary course of business according to policies consistently applied and reported on the Information Package related to, or in anticipation of, price discounts affecting the Receivables; or (b) the actual amount of credits issued against Receivables in the most recent calendar month related to such pricing discounts. I-25 "UPG Volume Rebates Reserve" means, at any time, an amount equal to the sum of (A) an amount equal to the product of (x) 0.50 and (y) the balance as of the beginning of the most recent calendar month of reserves or liabilities maintained on the books and records of the Unitary Products Group segment of York or the Servicer in the ordinary course of business according to policies consistently applied and reported on the Information Package related to, or in anticipation of, volume rebates affecting the Receivables; and (B) the amount of credits issued in the most recent calendar month related to such volume rebates (if current month credits are less than or equal to $0, then credits issued in the calendar month that is one month prior to the current calendar month). "Yield Period" means, with respect to each Portion of Investment: (a) before the Facility Termination Date: (i) initially the period commencing on the date of the initial Purchase pursuant to Section 1.2 of the Agreement (or in the case of any fees payable hereunder, commencing on the Closing Date) and ending on (but not including) the next Settlement Date, and (ii) thereafter, each period commencing on such Settlement Date and ending on (but not including) the next Settlement Date, and (b) on and after the Facility Termination Date, such period (including a period of one day) as shall be selected from time to time by the Administrator or, in the absence of any such selection, each period of 30 days from the last day of the preceding Yield Period. "Yield Rate" for any Yield Period for any Portion of Investment of the Purchased Interest (a) in the case of the Purchaser Group including Gotham, means the Gotham Yield Rate, (b) in the case of the Purchaser Group including Liberty Street, means the Liberty Street Yield Rate and (c) in the case of each other Purchaser Group, shall mean the rate set forth as the Yield Rate for such Purchaser Group in the related Purchaser Group Fee Letter. "Yield Reserve" shall be equal to the Aggregate Investment multiplied by a percentage equal to (a) the Yield Reserve Percentage divided by (b) 100% minus the Yield Reserve Percentage. "Yield Reserve Percentage" means, on any date, an amount equal to (a) the sum of the Base Rate for the most recent period plus 1.0%, multiplied by (b) the product of 1.5 times the Turnover Rate, divided by (c) 12. "York" has the meaning set forth in the preamble to the Agreement. "York Refrigeration Group Rebate Reserve" means, at any time, the greater of (a) the balance as of the beginning of the most recent calendar month of reserves or liabilities maintained on the books and records of the York Refrigeration Group segment of York or the Servicer in the ordinary course of business according to policies consistently applied and reported on the Information Package related to, or in anticipation of, rebate programs affecting the Receivables; or (b) the amount of credits issued in the most recent calendar month related to such rebate programs. "YorkSource Receivables" means any indebtedness and other obligations (whether or not earned by performance) owed to the Seller or any Originator by, or any right of the Seller or any Originator to payment from or on behalf of, an Obligor arising after July 16, 2004 related to an Originator's YorkSource program with respect to bundled design, installation, operation and I-26 maintenance contracts (including the related usage billings and equipment costs) as set forth on such Originator's books and records. Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. Unless the context otherwise requires, "or" means "and/or," and "including" (and with correlative meaning "include" and "includes") means including without limiting the generality of any description preceding such term. Unless the context otherwise requires, any reference to a calendar month, whether used in any calculation or otherwise, which such calendar month occurred prior to the Closing Date shall be and shall be deemed to be a reference to a "Fiscal Month" (as such term is defined in the Original Agreement). I-27 EXHIBIT II CONDITIONS OF PURCHASES 1. Conditions Precedent to Initial Purchase. The initial Purchase under this Agreement is subject to the following conditions precedent that the Administrator and each Purchaser Agent shall have received on or before the date of such Purchase, each in form and substance (including the date thereof) satisfactory to the Administrator and each Purchaser Agent: (a) A counterpart of the Agreement and the other Transaction Documents executed by the parties thereto. (b) Certified copies of: (i) the resolutions of the Board of Directors, the Managing Member or other managers of each of the Seller, the Originators and York authorizing the execution, delivery and performance by the Seller, such Originator and York, as the case may be, of the Agreement and the other Transaction Documents to which it is a party; (ii) all documents evidencing other necessary organizational action and governmental approvals, if any, with respect to the Agreement and the other Transaction Documents and (iii) the certificate of incorporation and by-laws or certificate of formation and limited liability company agreement or any other organizational document, as applicable, of the Seller, each Originator and York. (c) A certificate of the Secretary or Assistant Secretary of the Seller, the Originators and York certifying the names and true signatures of its officers who are authorized to sign the Agreement and the other Transaction Documents. Until the Administrator and each Purchaser Agent receives a subsequent incumbency certificate from the Seller, an Originator or York, as the case may be, the Administrator and each Purchaser Agent shall be entitled to rely on the last such certificate delivered to it by the Seller, such Originator or York, as the case may be. (d) Acknowledgment copies, or time stamped receipt copies, of proper financing statements, duly filed on or before the date of such initial purchase under the UCC of all jurisdictions that the Administrator may deem necessary or desirable in order to perfect the interests of the Seller, York and the Administrator (on behalf of each Purchaser) contemplated by the Agreement and the Purchase and Sale Agreement. (e) Acknowledgment copies, or time-stamped receipt copies, of proper financing statements, if any, necessary to release all security interests and other rights of any Person in the Receivables, Contracts or Related Security previously granted by the Originators, York or the Seller (other than the financing statements in favor of the "Administrator" under the Original Agreement and each of which shall have been fully assigned to the Administrator). (f) Completed UCC search reports, dated on or shortly before the date of the initial purchase hereunder, listing the financing statements filed in all applicable jurisdictions referred to in subsection (d) above that name the Originators or the Seller as II-1 debtor, together with copies of such other financing statements, and similar search reports with respect to judgment liens, federal tax liens and liens of the Pension Benefit Guaranty Corporation in such jurisdictions, as the Administrator or any Purchaser Agent may request, showing no Adverse Claims on any Pool Assets. (g) Copies of executed Lock-Box Agreements with each Lock-Box Bank and each amendment thereto. (h) Favorable opinions, in form and substance reasonably satisfactory to the Administrator and each Purchaser Agent, of: (i) Blank Rome LLP, counsel for the Seller, each Originator, York and the Servicer, and (ii) general counsel for Seller, York and each Originator. (i) Satisfactory results of a review and audit (performed by representatives of each Purchaser Agent) of the Servicer's collection, operating and reporting systems, the Credit and Collection Policy of each Originator, historical receivables data and accounts, including satisfactory results of a review of the Servicer's operating location(s) in each case, in the sole discretion of the Administrator and each Purchaser. (j) An Information Package representing the performance of the Receivables Pool for the calendar month before closing and a Funding Plan for the calendar month during which the Closing Date occurs. (k) Evidence of payment by the Seller of all accrued and unpaid fees (including those contemplated by each Purchaser Group Fee Letter), costs and expenses to the extent then due and payable on the date thereof, including any such costs, fees and expenses arising under or referenced in Section 6.4 of the Agreement and the Fee Letter. (l) Each Purchaser Group Fee Letter (received only by the related Purchaser Group Agent) duly executed by the Seller and the Servicer. (m) Good standing certificates with respect to each of the Seller, the Originators and the Servicer issued by the Secretary of State (or similar official) of the state of each such Person's organization and principal place of business. (n) To the extent required by each Conduit Purchaser's commercial paper program, letters from each of the rating agencies then rating the Notes confirming the rating of such Notes after giving effect to the transaction contemplated by the Agreement. (o) Each Liquidity Agreement (received only by the related Purchaser Group Agent) and all other Transaction Documents duly executed by the parties thereto. (p) A computer file containing all information with respect to the Receivables as the Administrator or any Purchaser Agent may reasonably request. (q) Such other approvals, opinions or documents as the Administrator or any Purchaser Agent may reasonably request. II-2 2. Conditions Precedent to All Purchases and Reinvestments. Each Purchase (including the initial Purchase) and each reinvestment shall be subject to the further conditions precedent that: (a) solely in the case of each purchase but not a reinvestment, the Servicer shall have delivered to the Administrator and each such Purchaser Agent on or before such purchase, in form and substance satisfactory to the Administrator and such Purchaser Agent, a Funding Plan, a completed pro forma Information Package to reflect the level of Investment with respect to each Purchaser Group and related reserves and the calculation of the Purchased Interest after such subsequent purchase and a completed purchase notice in the form of Annex B to the Agreement; and (b) on the date of such purchase or reinvestment, the following statements shall be true (and acceptance of the proceeds of such purchase or reinvestment shall be deemed a representation and warranty by the Seller that such statements are then true): (i) the representations and warranties contained in Exhibit III to the Agreement are true and correct in all material respects on and as of the date of such purchase or reinvestment as though made on and as of such date (except to the extent that such representations and warranties relate expressly to an earlier date, and in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); (ii) no event has occurred and is continuing, or would result from such purchase or reinvestment, that constitutes a Termination Event or an Unmatured Termination Event; (iii) after giving effect to such purchase or reinvestment, the Purchased Interest will not exceed 100% and the Aggregate Investment will not exceed the Purchase Limit; and (iv) the Facility Termination Date shall not have occurred. II-3 EXHIBIT III REPRESENTATIONS AND WARRANTIES 1. Representations and Warranties of the Seller. The Seller represents and warrants as follows: (a) The Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and is duly qualified to do business and is in good standing as a foreign organization in every jurisdiction where the nature of its business requires it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect. (b) The execution, delivery and performance by the Seller of the Agreement and the other Transaction Documents to which it is a party, including its use of the proceeds of purchases and reinvestments: (i) are within its organizational powers; (ii) have been duly authorized by all necessary organizational action; (iii) do not contravene or result in a default under or conflict with: (A) its certification of formation or limited liability company agreement, (B) any law, rule or regulation applicable to it, (C) any indenture, loan agreement, mortgage, deed of trust or other material agreement or instrument to which it is a party or by which it is bound, or (D) any order, writ, judgment, award, injunction or decree binding on or affecting it or any of its property; and (iv) do not result in or require the creation of any Adverse Claim upon or with respect to any of its properties. The Agreement and the other Transaction Documents to which it is a party have been duly executed and delivered by the Seller. (c) No authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or other Person is required for its due execution, delivery and performance by the Seller of the Agreement or any other Transaction Document to which it is a party, other than the Uniform Commercial Code filings referred to in Exhibit II to the Agreement, all of which shall have been filed on or before the date of the first purchase hereunder. (d) Each of the Agreement and the other Transaction Documents to which the Seller is a party constitutes its legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws from time to time in effect affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (e) There is no pending or, to Seller's best knowledge, threatened action or proceeding affecting Seller or any of its properties before any Governmental Authority or arbitrator. (f) No proceeds of any purchase or reinvestment will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934. III-1 (g) The Seller is the legal and beneficial owner of the Pool Receivables and Related Security, free and clear of any Adverse Claim. Upon each purchase or reinvestment, Administrator (for the benefit of each Purchaser) shall acquire a valid and enforceable perfected undivided percentage ownership or security interest, to the extent of the Purchased Interest, in each Pool Receivable then existing or thereafter arising and in the Related Security, Collections and other proceeds with respect thereto, free and clear of any Adverse Claim. The Agreement creates a security interest in favor of the Administrator (for the benefit of each Purchaser) in the Pool Assets, and the Administrator (for the benefit of each Purchaser) has a first priority perfected security interest in the Pool Assets, free and clear of any Adverse Claims. No effective financing statement or other instrument similar in effect covering any Pool Asset is on file in any recording office, except those filed in favor of the Seller pursuant to the Purchase and Sale Agreement and the Administrator (for the benefit of each Purchaser) relating to the Agreement, or in respect of which the Administrator has received evidence satisfactory to the Administrator of acknowledgment copies, or time-stamped receipt copies, of proper financing statements releasing or terminating, as applicable, all security interests and other rights of any Person in such Pool Asset. (h) Each Information Package (if prepared by the Seller or one of its Affiliates, or to the extent that information contained therein is supplied by the Seller or an Affiliate), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of the Seller to the Administrator or any Purchaser Agent in connection with the Agreement or any other Transaction Document to which it is a party is or will be complete and accurate in all material respects as of its date or as of the date so furnished, and does not and will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading. (i) The Seller's principal place of business and chief executive office (as such terms are used in the UCC) and the office where it keeps its records concerning the Receivables are located at the address referred to in Section 1(b) and 2(b) of Exhibit IV to the Agreement. The Seller is a limited liability company, organized under the laws of the State of Delaware and its organizational number is 3469762. (j) The names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts (and the related lock-boxes) at such Lock-Box Banks, are specified in Schedule II to the Agreement (or at such other Lock-Box Banks and/or with such other Lock-Box Accounts (and such other related lock-boxes) as have been notified to the Administrator in accordance with the Agreement) and all Lock-Box Accounts (and all related lock-boxes) are subject to Lock-Box Agreements. Seller has not granted to any Person, other than the Administrator as contemplated by the Agreement, dominion and control of any Lock-Box Account, or the right to take dominion and control of any such account at a future time or upon the occurrence of a future event. (k) The Seller is not in violation of any order of any court, arbitrator or Governmental Authority. III-2 (l) Neither the Seller nor any of its Affiliates has any direct or indirect ownership or other financial interest in any Purchaser. (m) No proceeds of any purchase or reinvestment will be used for any purpose that violates any applicable law, rule or regulation, including Regulations T, U or X of the Federal Reserve Board. (n) Each Pool Receivable included as an Eligible Receivable in the calculation of the Net Receivables Pool Balance is an Eligible Receivable. (o) No event has occurred and is continuing that constitutes a Termination Event or an Unmatured Termination Event and no event would result from a purchase in respect of, or reinvestment in respect of, the Purchased Interest or from the application of the proceeds therefrom that constitutes a Termination Event or an Unmatured Termination Event. (p) The Seller has accounted for each sale of undivided percentage ownership interests in Receivables in its books and financial statements as sales, consistent with generally accepted accounting principles. (q) The Seller has complied in all material respects with the Credit and Collection Policy of each Originator with regard to each Receivable originated by such Originator. (r) The Seller has complied in all material respects with all of the terms, covenants and agreements contained in the Agreement and the other Transaction Documents that are applicable to it and all laws, rules, regulations and orders that are applicable to it. (s) The Seller's complete organizational name is set forth in the preamble to the Agreement, and it does not use and has not during the last six years used any other organizational name, trade name, doing-business name or fictitious name, except as set forth on Schedule III to the Agreement and except for names first used after the date of the Agreement and set forth in a notice delivered to the Administrator pursuant to Section 1(k)(iv) of Exhibit IV to the Agreement. (t) The Seller is not an "investment company," or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. In addition, the Seller is not a "holding company," a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. (u) With respect to each Receivable transferred to the Seller under the Purchase and Sale Agreement, Seller has given reasonably equivalent value to the Originator thereof in consideration therefor and such transfer was not made for or on account of an antecedent debt. No transfer by any Originator of any Receivable under the III-3 Purchase and Sale Agreement is or may be voidable under any section of the Bankruptcy Code. (v) Each Contract with respect to each Receivable is effective to create, and has created, a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, enforceable against the Obligor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (w) Since its most recent fiscal year end, there has been no change in the business, operations, financial condition, properties or assets of the Seller which would have a Material Adverse Effect on its ability to perform its obligations under the Agreement or any other Transaction Document to which it is a party or materially and adversely affect the transactions contemplated under the Agreement or such other Transaction Documents. (x) The Seller has filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. 2. Representations and Warranties of York (including in its capacity as the Servicer). York, individually and in its capacity as the Servicer, represents and warrants as follows: (a) York is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and is duly qualified to do business and is in good standing as a foreign corporation in every jurisdiction where the nature of its business requires it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect. (b) The execution, delivery and performance by York, of the Agreement and the other Transaction Documents to which it is a party, including the Servicer's use of the proceeds of purchases and reinvestments: (i) are within its corporate powers; (ii) have been duly authorized by all necessary corporate action; (iii) do not contravene or result in a default under or conflict with: (A) its charter or by-laws, (B) any law, rule or regulation applicable to it, (C) any indenture, loan agreement, mortgage, deed of trust or other material agreement or instrument to which it is a party or by which it is bound, or (D) any order, writ, judgment, award, injunction or decree binding on or affecting it or any of its property; and (iv) do not result in or require the creation of any Adverse Claim upon or with respect to any of its properties. The Agreement and the other Transaction Documents to which York is a party have been duly executed and delivered by York. III-4 (c) No authorization, approval or other action by, and no notice to or filing with any Governmental Authority or other Person, is required for the due execution, delivery and performance by York of the Agreement or any other Transaction Document to which it is a party. (d) Each of the Agreement and the other Transaction Documents to which York is a party constitutes the legal, valid and binding obligation of York enforceable against York in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws from time to time in effect affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (e) The balance sheets of York and its consolidated Subsidiaries as at December 31, 2003, and the related statements of income and retained earnings for the fiscal year then ended, copies of which have been furnished to the Administrator and each Purchaser Agent, fairly present the financial condition of York and its consolidated Subsidiaries as at such date and the results of the operations of York and its Subsidiaries for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied, and since December 31, 2003 there has been no event or circumstances which have had a Material Adverse Effect. (f) Except as disclosed in the most recent audited financial statements of York furnished to the Administrator and each Purchaser Agent, there is no pending or, to its best knowledge, threatened action or proceeding affecting it or any of its Subsidiaries before any Governmental Authority or arbitrator that could have a Material Adverse Effect. (g) No proceeds of any purchase or reinvestment will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934. (h) Each Information Package (if prepared by York or one of its Affiliates, or to the extent that information contained therein is supplied by York or an Affiliate), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of the Servicer to the Administrator, any Purchaser or any Purchaser Agent in connection with the Agreement is or will be complete and accurate in all material respects as of its date or as of the date so furnished and does not and will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not materially misleading. (i) The principal place of business and chief executive office (as such terms are used in the UCC) of York and the office where it keeps its records concerning the Receivables are located at the address referred to in Section 2(b) of Exhibit IV to the Agreement. York is a corporation, organized under the laws of the State of Delaware and its organizational number is 2164946. III-5 (j) York is not in violation of any order of any court, arbitrator or Governmental Authority, which could have a Material Adverse Effect. (k) Neither York nor any of its Affiliates has any direct or indirect ownership or other financial interest in any Purchaser. (l) The Servicer has complied in all material respects with the Credit and Collection Policy of each Originator with regard to each Receivable originated by such Originator. (m) York has complied in all material respects with all of the terms, covenants and agreements contained in the Agreement and the other Transaction Documents that are applicable to it. (n) York is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. In addition, York is not a "holding company," a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. (o) Since its most recent fiscal year end, there has been no change in the business, operations, financial condition, properties or assets of the Servicer which would have a Material Adverse Effect on its ability to perform its obligations under the Agreement or any other Transaction Document to which it is a party or materially and adversely affect the transactions contemplated under the Agreement or such other Transaction Documents. (p) [RESERVED]. (q) The Servicer has filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. III-6 EXHIBIT IV COVENANTS 1. Covenants of the Seller. Until the latest of the Facility Termination Date, the date on which no Investment of or Discount in respect of the Purchased Interest shall be outstanding or the date all other amounts owed by the Seller under the Agreement to any Purchaser, Purchaser Agent, the Administrator and any other Indemnified Party or Affected Person shall be paid in full: (a) Compliance with Laws, Etc. The Seller shall comply in all material respects with all applicable laws, rules, regulations and orders, and preserve and maintain its organizational existence, rights, franchises, qualifications and privileges, except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such rights, franchises, qualifications and privileges would not have a Material Adverse Effect. (b) Offices, Records and Books of Account, Etc. The Seller: (i) shall keep its principal place of business and chief executive office (as such terms or similar terms are used in the UCC) and the office where it keeps its records concerning the Receivables at the address of the Seller set forth under its name on the signature page to the Agreement and keep its state of organization at the state set forth in Section 1(a) of Exhibit III or, pursuant to clause (k)(iv) below, at any other locations in jurisdictions where all actions reasonably requested by the Administrator to protect and perfect the interest of the Administrator (for the benefit of the Purchasers) in the Receivables and related items (including the Pool Assets) have been taken and completed and (ii) shall provide the Administrator with at least 30 days' written notice before making any change in the Seller's name or making any other change in the Seller's identity or organizational structure (including a Change in Control) that could render any UCC financing statement filed in connection with this Agreement "seriously misleading" as such term (or similar term) is used in the UCC or to be filed in the incorrect jurisdiction in order to protect and perfect the interest of the Administrator (for the benefit of the Purchasers) in the Receivables and related items (including the Pool Assets) as a first priority security interest; each notice to the Administrator pursuant to this sentence shall set forth the applicable change and the effective date thereof. The Seller also will maintain and implement (or cause the Servicer to maintain and implement) administrative and operating procedures (including an ability to recreate records evidencing Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain (or cause the Servicer to keep and maintain) all documents, books, records, computer tapes and disks and other information reasonably necessary or advisable for the collection of all Receivables (including records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each existing Receivable). The Seller will (and will cause each Originator to) on or prior to the date of the Agreement, mark its master data processing records and other books and records relating to the Purchased Interest (and at all times thereafter (until the latest of the Facility Termination Date or the date all other amounts owed by the Seller under the Agreement shall be paid in full) continue to maintain such records) with a legend, acceptable to the Administrator, describing the Purchased Interest. IV-1 (c) Performance and Compliance with Contracts and Credit and Collection Policy. The Seller shall (and shall cause the Servicer to), at its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables and timely and fully comply in all material respects with the applicable Credit and Collection Policies with regard to each Receivable and the related Contract. (d) Ownership Interest, Etc. The Seller shall (and shall cause the Servicer to), at its expense, take all action necessary or desirable to establish and maintain a valid and enforceable undivided percentage ownership or security interest, to the extent of the Purchased Interest which shall not be greater than 100%, in the Pool Receivables, the Related Security and Collections with respect thereto, and a first priority perfected security interest in the Pool Assets, in each case free and clear of any Adverse Claim, in favor of the Administrator (for the benefit of the Purchasers), including taking such action to perfect, protect or more fully evidence the interest of the Administrator (for the benefit of the Purchasers) as the Administrator, may reasonably request. (e) Sales, Liens, Etc. The Seller shall not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, any or all of its right, title or interest in, to or under any Pool Assets (including the Seller's undivided interest in any Receivable, Related Security or Collections, or upon or with respect to any account to which any Collections of any Receivables are sent), or assign any right to receive income in respect of any items contemplated by this paragraph; provided however, the Seller may (I) sell (or direct the Servicer on its behalf to sell) to a third-party collection agency, any Receivables (and the Related Security with respect thereto) in an arms-length transaction which, consistent with the Credit and Collection Policy and the terms and conditions of this Agreement and the other Transaction Documents, have been written off the Seller's books as uncollectible if all proceeds of any such sale are remitted to a Lock-Box Account and are treated and applied as Collections hereunder and distributed as such in accordance herewith and (II) may sell and assign, without recourse, any Excluded Foreign Receivables (and the Related Security with respect thereto) in connection with a Take Out Securitization, after satisfaction of each of the conditions set forth in clause (q) of this Exhibit IV and if all proceeds of any such sale are remitted to a Lock-Box Account and are treated and applied as Collections hereunder and distributed as such in accordance herewith; provided, further, no such sale or assignment, as applicable, shall be permitted (A) at any time a Termination Event or an Unmatured Termination Event exists or would result from such sale or assignment, as applicable and (B) unless each buyer or assignor, as applicable, in any such sale or assignment, as applicable, agrees that any amounts payable by a Conduit Purchaser in connection with any such sale or assignment, as applicable, are subject to the limitations set forth in Section 6.5(b) of the Agreement and that it will not institute any proceeding of the type described in clause (f) of Exhibit V hereto against any Conduit Purchaser until a year and a day after the latest maturing Note issued by such Conduit Purchaser has finally been paid in full. The Administrator and each Purchaser Agent agree that each (i) automatically and without any further consent or action release and all of their right, title and interest in, to and under each such Receivable (and the Related Security with respect thereto) which has IV-2 been sold or assigned, as applicable, in accordance with the terms of this clause (e) and (ii) agree, from time to time take such action, or execute and deliver such instruments, at the sole expense of the Seller, (including authorizing the filing UCC3 termination statements) as may be reasonably requested by the Seller (or the Servicer on its behalf) in order to release the Administrator's security interest in such Receivable (and the Related Security with respect thereto) so sold or assigned, as applicable. (f) Extension or Amendment of Receivables. Except as provided in the Agreement, the Seller shall not, and shall not permit the Servicer to, extend the maturity or adjust the Outstanding Balance or otherwise modify the terms of any Pool Receivable, or amend, modify or waive any term or condition of any related Contract. (g) Change in Business or Credit and Collection Policy. The Seller shall not make (or permit any Originator to make) any change in the character of its business or in any Credit and Collection Policy that would have a Material Adverse Effect. The Seller shall not make (or permit any Originator to make) any other change in any Credit and Collection Policy without the prior written consent of thereof to the Administrator and each Purchaser Agent. (h) Audits. The Seller shall (and shall cause each Originator to), from time to time during regular business hours, but no more frequently than annually unless (x) a Termination Event or an Unmatured Termination Event has occurred and is continuing or (y) in the opinion of the Administrator (with the consent or at the direction of the Majority Purchasers) reasonable grounds for insecurity exist with respect to the collectibility of a material portion of the Pool Receivables or with respect to the Seller's performance or ability to perform in any material respect its obligations under the Agreement, as reasonably requested in advance (unless a Termination Event or Unmatured Termination Event exists) by the Administrator or any Purchaser, permit the Administrator or any Purchaser, or agent or representatives of the Administration or any Purchaser: (i) to examine and make copies of and abstracts from all books, records and documents (including computer tapes and disks) in the possession or under the control of the Seller (or any such Originator) relating to Receivables and the Related Security, including the related Contracts, and (ii) to visit the offices and properties of the Seller and the Originators for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to Receivables and the Related Security or the Seller's, York's or the Originator's performance under the Transaction Documents or under the Contracts with any of the officers, employees, agents or contractors of the Seller, York or the Originator having knowledge of such matters and (iii) without limiting clauses (i) and (ii) above, no more than once annually (unless a Termination Event or an Unmatured Termination Event exists or there shall be a material variance in the performance of the Receivables), during regular business hours, and upon reasonable prior notice, to engage certified public accountants or other auditors acceptable to the Seller and the Administrator to conduct, at the Seller's expense, a review of the Seller's books and records with respect to such Receivables. (i) Change in Lock-Box Banks, Lock-Box Accounts and Payment Instructions to Obligors. The Seller shall not, and shall not permit the Servicer or any IV-3 Originator to, add or terminate any bank as a Lock-Box Bank or any account as a Lock-Box Account (or any related lock-box) from those listed in Schedule II to the Agreement, or make any change in its instructions to Obligors regarding payments to be made to the Seller, the Originators, the Servicer or any Lock-Box Account (or related lock-box), unless the Administrator and the Majority Purchasers shall have consented thereto in writing and the Administrator shall have received copies of all agreements and documents (including Lock-Box Agreements) that it may reasonably request in connection therewith. Notwithstanding anything herein to the contrary, the Administrator and the Majority Purchasers shall not be required to consent in connection with the Seller's request to terminate and/or add any bank as a Lock-Box Bank and/or Lock-Box Account provided that the new Lock-Box Bank or Lock-Box Account to be added is (or is with) a commercial bank having a combined capital and surplus of at least $250,000,000. The Seller will not (and will not permit the Servicer to) deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account cash or cash proceeds other than Collections, including, from and after the effectiveness of any Take Out Securitization, cash or cash proceeds related to Excluded Foreign Receivables or any cash or cash proceeds of receivables which do not constitute "Receivables" under the Transaction Documents at the time of deposit. (j) Deposits to Lock-Box Accounts. The Seller shall (or shall cause the Servicer to): (i) deposit, or cause to be deposited, any Collections received by it, the Servicer or any Originator into Lock-Box Accounts not later than one Business Day after receipt thereof, and (ii) instruct all Obligors to make payments of all Receivables to one or more Lock-Box Accounts or to lock-boxes to which only Lock-Box Banks have access (and shall instruct the Lock-Box Banks to cause all items and amounts relating to such Receivables received in such lock-boxes to be removed and deposited into a Lock-Box Account on a daily basis). Each Lock-Box Account shall at all times be subject to a Lock-Box Agreement. The Seller will not (and will not permit the Servicer to) deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account cash or cash proceeds other than Collections including, from and after the effectiveness of any Take Out Securitization, cash or cash proceeds related to Excluded Foreign Receivables cash or cash proceeds of receivables which do not constitute "Receivables" under the Transaction Documents at the time of deposit. (k) Reporting Requirements. The Seller will provide to the Administrator (in multiple copies, if requested by the Administrator) and each Purchaser Agent the following: (i) as soon as available and in any event within 90 days after the end of each fiscal year of the Seller, unaudited financial statements for such year certified as to accuracy by the chief financial officer or treasurer of the Seller; (ii) as soon as possible and in any event within five days after the occurrence of each Termination Event or Unmatured Termination Event, a statement of the chief financial officer of the Seller setting forth details of such Termination Event or Unmatured Termination Event and the action that the Seller has taken and proposes to take with respect thereto; IV-4 (iii) promptly after the filing or receiving thereof, copies of all reports and notices that the Seller or any Affiliate files under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that the Seller or any Affiliate receives from any of the foregoing or from any multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) to which the Seller or any of its Affiliates is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal liability or an event or condition that could, in the aggregate, result in the imposition of material liability on the Seller and/or any such Affiliate; (iv) at least 30 days before any change in the Seller's name or any other change requiring the amendment of UCC financing statements, a notice setting forth such changes and the effective date thereof; (v) promptly after the Seller obtains knowledge thereof, notice of any: (A) litigation, investigation or proceeding that may exist at any time between the Seller and any Person or (B) litigation or proceeding relating to any Transaction Document; (vi) promptly after obtaining knowledge thereof, notice of a material adverse change in the business, operations, property or financial or other condition of the Seller, the Servicer or any Originator; and (vii) such other information respecting the Receivables or the condition or operations, financial or otherwise, of the Seller or any of its Affiliates as the Administrator or any Purchaser Agent may from time to time reasonably request. (l) Certain Agreements. Without the prior written consent of the Administrator and the Majority Purchasers, the Seller will not (and will not permit any Originator to) amend, modify, waive, revoke or terminate any Transaction Document to which it is a party or any provision of Seller's certificate of incorporation or by-laws. (m) Restricted Payments. (i) Except pursuant to clause (ii) below, the Seller will not: (A) purchase or redeem any shares of its capital stock, (B) declare or pay any dividend or set aside any funds for any such purpose, (C) prepay, purchase or redeem any Debt, (D) lend or advance any funds or (E) repay any loans or advances to, for or from any of its Affiliates (the amounts described in clauses (A) through (E) being referred to as "Restricted Payments"). (ii) Subject to the limitations set forth in clause (iii) below, the Seller may make Restricted Payments so long as such Restricted Payments are made only in one or more of the following ways: (A) the Seller may make cash payments (including prepayments) on the Company Note in accordance with its terms, and (B) if no amounts are then outstanding under the Company Note, the Seller may declare and pay dividends. IV-5 (iii) The Seller may make Restricted Payments only out of the funds it receives pursuant to Sections 1.4(b)(ii) and (iv) of the Agreement. Furthermore, the Seller shall not pay, make or declare: (A) any dividend if, after giving effect thereto, the Seller's Tangible Net Worth would be less than $20,000,000 or (B) any Restricted Payment (including any dividend) if, after giving effect thereto, any Termination Event or Unmatured Termination Event shall have occurred and be continuing. (n) Other Business. The Seller will not: (i) engage in any business other than the transactions contemplated by the Transaction Documents; (ii) create, incur or permit to exist any Debt of any kind (or cause or permit to be issued for its account any letters of credit or bankers' acceptances) other than pursuant to this Agreement or the Company Note; or (iii) form any Subsidiary or make any investments in any other Person; provided, however, that the Seller shall be permitted to incur minimal obligations to the extent necessary for the day-to-day operations of the Seller (such as expenses for stationery, audits, maintenance of legal status, etc.). (o) Use of Seller's Share of Collections. The Seller shall apply the Seller's Share of Collections to make payments in the following order of priority: (i) the payment of its expenses (including all obligations payable to the Purchaser Groups and the Administrator under the Agreement and under each Purchaser Group Fee Letter); (ii) the payment of accrued and unpaid interest on the Company Note; and (iii) other legal and valid organizational purposes. (p) Tangible Net Worth. The Seller will not permit its Tangible Net Worth, at any time, to be less than $20,000,000. (q) Take Out Securitization of Foreign Receivables. The Seller may, upon not less than 30 days prior written notice from it (or the Servicer on its behalf) to the Administrator, the Originators and each Purchaser (which notice shall specify the cut-off date after which foreign receivables shall no longer be sold by Originators and purchased by the Seller under the Purchase and Sale Agreement), enter into a Take Out Securitization, but solely to the extent that each of the following conditions have been satisfied: (i) On or prior to the effectiveness of such Take Out Securitization and the documents relating thereto and if requested by the Administrator or any Purchaser Agent, the applicable transferees, lenders, investors and/or similar parties under such Take Out Securitization shall have delivered a fully executed copy of an intercreditor agreement among, inter alia, the Administrator and each Purchaser Agent, in form and substance reasonably acceptable to the Administrator and each such Purchaser Agent, and all of the conditions precedent to such intercreditor agreement shall have been satisfied; (ii) On or prior to the effectiveness of such Take Out Securitization and the documents relating thereto, at the request of the Administrator or any Purchaser Agent, the Servicer shall have provided a twelve-month pro forma IV-6 Information Package restating all applicable historical data and information from the Closing Date through the effective date of such Take Out Securitization, related to the Receivables Pool after giving effect to such Take Out Securitization; (iii) On or prior to the effectiveness of such Take Out Securitization and the documents relating thereto, each of the Servicer and the Seller shall have delivered an officer certificate, stating that immediately prior to the effectiveness of the Take Out Securitization and immediately after giving effect thereto: (A) each of the representations and warranties contained in the Agreement are correct on and as of such dates as though made on and as of such dates and shall be deemed to have been made on such dates; (B) no Termination Event or Unmatured Termination Event has occurred and is continuing, or would result from such Take Out Securitization; (C) the Purchased Interest will not exceed 100% and the Aggregate Investment will not exceed the Purchase Limit; (D) the Facility Termination Date shall not have occurred; and (E) upon the Administrator's consent referred to in clause (v) below related to the foreign Receivables with respect thereto the proceeds from any such Take Out Securitization have been remitted to a Lock-Box Account and are and will be treated and applied as Collections under the Agreement and distributed as such in accordance therewith. (iv) On or prior to the effectiveness of such Take Out Securitization and the documents relating thereto, each of the Seller and the Servicer shall have provided the Administrator and each Purchaser Agent with such other approvals, opinions, reports or documents or shall enter into any amendments hereto as the Administrator or any Purchaser Agent may reasonably request. (v) Upon the satisfaction of each of the conditions set forth in this Section 1(q) and payment of the fees set forth in Section 6.4 of the Agreement, the Administrator and each Purchaser Agent may, prior to the specified cut off date for such Take Out Securitization, consent to the Seller's disposal of the foreign Receivables in which it or any Purchaser then has an interest, and absent such consent the Seller shall not include any foreign receivable in which any Purchaser has an interest in the Take-Out Securitization (which excludes Excluded Foreign Receivables). 2. Covenants of the Servicer and York. Until the latest of the Facility Termination Date, the date on which no Investment of or Discount in respect of the Purchased Interest shall be outstanding or the date all other amounts owed by the Seller under the Agreement to the Purchaser Agents, the Purchasers, the Administrator and any other Indemnified Party or Affected Person shall be paid in full: IV-7 (a) Compliance with Laws, Etc. The Servicer and, to the extent that it ceases to be the Servicer, York shall comply (and shall cause each Originator to comply) in all material respects with all applicable laws, rules, regulations and orders, and preserve and maintain its corporate existence, rights, franchises, qualifications and privileges, except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such existence, rights, franchises, qualifications and privileges would not have a Material Adverse Effect. (b) Offices, Records and Books of Account, Etc. The Servicer and, to the extent that it ceases to be the Servicer, York, shall keep (and shall cause each Originator to keep) its principal place of business and chief executive office (as such terms or similar terms are used in the applicable UCC) and the office where it keeps its records concerning the Receivables at the address of the Servicer set forth under its name on the signature page to the Agreement or, upon at least 30 days' prior written notice of a proposed change to the Administrator, at any other locations in jurisdictions where all actions reasonably requested by the Administrator to protect and perfect the interest of the Administrator (for the benefit of each Purchaser) in the Receivables and related items (including the Pool Assets) have been taken and completed. The Servicer and, to the extent that it ceases to be the Servicer, York, also will (and will cause each Originator to) maintain and implement administrative and operating procedures (including an ability to recreate records evidencing Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records, computer tapes and disks and other information reasonably necessary or advisable for the collection of all Receivables (including records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each existing Receivable). The Servicer will (and will cause each Originator to) on or prior to the date of the Agreement, mark its master data processing records and other books and records relating to the Purchased Interest (and at all times thereafter (until the latest of the Facility Termination Date or the date all other amounts owing by the Seller under the Agreement shall be paid in full) continue to maintain such records) with a legend, acceptable to the Administrator, describing the Purchased Interest. (c) Performance and Compliance with Contracts and Credit and Collection Policy. The Servicer and, to the extent that it ceases to be the Servicer, York, shall (and shall cause each Originator to), at its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables, and timely and fully comply in all material respects with the applicable Credit and Collection Policies with regard to each Receivable and the related Contract. (d) Extension or Amendment of Receivables. Except as provided in the Agreement, the Servicer and, to the extent that it ceases to be the Servicer, York, shall not extend (and shall not permit any Originator to extend), the maturity or adjust the Outstanding Balance or otherwise modify the terms of any Pool Receivable, or amend, modify or waive any term or condition of any related Contract. IV-8 (e) Change in Business or Credit and Collection Policy. The Servicer and, to the extent that it ceases to be the Servicer, York, shall not make (and shall not permit any Originator to make) any change in the character of its business or in any Credit and Collection Policy that would have a Material Adverse Effect. The Servicer and, to the extent that it ceases to be the Servicer, York, shall not make (and shall not permit any Originator to make) any other change in any Credit and Collection Policy without the prior written consent of the Administrator and each Purchaser Agent. (f) Audits. The Servicer and, to the extent that it ceases to be the Servicer, York, shall (and shall cause each Originator to), from time to time during regular business hours, but no more frequently than annual unless (x) a Termination Event or Unmatured Termination Event has occurred and is continuing or (y) in the opinion of the Administrator (with the consent or at the direction of the Majority Purchasers) reasonable grounds for insecurity exist with respect to the collectibility of a material portion of the Pool Receivables or with respect to the Servicer's performance or ability to perform in any material respect its obligations under the Agreement, as reasonably requested in advance (unless a Termination Event or Unmatured Termination Event exists) by the Administrator or a Purchaser, permit the Administrator or a Purchaser, or of the Administrator or any Purchaser agent or representative: (i) to examine and make copies of and abstracts from all books, records and documents (including computer tapes and disks) in its possession or under its control relating to Receivables and the Related Security, including the related Contracts; and (ii) to visit its offices and properties for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to Receivables and the Related Security or its performance hereunder or under the Contracts with any of its officers, employees, agents or contractors having knowledge of such matters and (iii) without limiting clauses (i) and (ii) above, no more than once annually (unless a Termination Event or an Unmatured Termination Event exists or there shall be a material variance in the performance of the Receivables), during regular business hours, and upon reasonable prior notice, to engage certified public accountants or other auditors acceptable to the Servicer and the Administrator to conduct, at the Servicer's expense, a review of the Servicer's books and records with respect to such Receivables. (g) Change in Lock-Box Banks, Lock-Box Accounts and Payment Instructions to Obligors. The Servicer and, to the extent that it ceases to be the Servicer, York, shall not (and shall not permit any Originator to) add or terminate any bank as a Lock-Box Bank or any account as a Lock-Box Account (or any related lock-box) from those listed in Schedule II to the Agreement, or make any change in its instructions to Obligors regarding payments to be made to the Servicer or any Lock-Box Account (or related lock-box), unless the Administrator and the Majority Purchasers shall have consented thereto in writing and the Administrator shall have received copies of all agreements and documents (including Lock-Box Agreements) that it may reasonably request in connection therewith. Notwithstanding anything herein to the contrary, the Administrator and the Majority Purchasers shall not be required to consent in connection with the Servicer's request to terminate and/or add any bank as a Lock-Box Bank and/or Lock-Box Account provided that the new Lock-Box Bank or Lock-Box Account to be added is (or is with) a commercial bank having a combined capital and surplus of at least IV-9 $250,000,000. The Servicer will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account cash or cash proceeds other than Collections, including, from and after the effectiveness of any Take Out Securitization, cash or cash proceeds related to Excluded Foreign Receivables or any cash or cash proceeds of receivables which do not constitute "Receivables" under the Transaction Documents at the time of deposit. (h) Deposits to Lock-Box Accounts. The Servicer shall: (i) deposit, or cause to be deposited, any Collections received by it into Lock-Box Accounts not later than one Business Day after receipt thereof, and (ii) instruct all Obligors to make payments of all Receivables to one or more Lock-Box Accounts or to lock-boxes to which only Lock-Box Banks have access (and shall instruct the Lock-Box Banks to cause all items and amounts relating to such Receivables received in such lock-boxes to be removed and deposited into a Lock-Box Account on a daily basis). Each Lock-Box Account shall at all times be subject to a Lock-Box Agreement. The Servicer will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account cash or cash proceeds other than Collections, including, from and after the effectiveness of any Take Out Securitization, cash or cash proceeds related to Excluded Foreign Receivables. or any cash or cash proceeds of receivables which do not constitute "Receivables" under the Transaction Documents at the time of deposit. (i) Reporting Requirements. York shall provide to the Administrator (in multiple copies, if requested by the Administrator) and each Purchaser Agent the following: (i) as soon as available and in any event within 45 days after the end of the first three quarters of each fiscal year of York and the Seller, balance sheets of York and its consolidated Subsidiaries and of Seller as of the end of such quarter and statements of income, retained earnings and cash flow of York and its consolidated Subsidiaries and the Seller for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the chief financial officer of such Person; (ii) as soon as available and in any event within 90 days after the end of each fiscal year of York and of Seller, a copy of the annual report for such year for York and its consolidated Subsidiaries and the Seller, containing financial statements for such year audited by independent certified public accountants of nationally recognized standing; (iii) as to the Servicer only, as soon as available and in any event not later than two Business Days prior to the Settlement Date, an Information Package as of the last day of such month or, within 10 Business Days of a request by the Administrator or any Purchaser Agent, an Information Package for such periods as is specified by the Administrator or such Purchaser Agent (including on a semi-monthly, weekly or daily basis); IV-10 (iv) as soon as possible and in any event within five days after becoming aware of the occurrence of each Termination Event or Unmatured Termination Event, a statement of the chief financial officer of York setting forth details of such Termination Event or Unmatured Termination Event and the action that such Person has taken and proposes to take with respect thereto; (v) promptly after the sending or filing thereof, copies of all reports that York sends to any of its security holders, and copies of all reports and registration statements that York or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange; provided, that any filings with the Securities and Exchange Commission that have been granted "confidential" treatment shall be provided promptly after such filings have become publicly available; (vi) promptly after the filing or receiving thereof, copies of all reports and notices that York or any of its Affiliate files under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that such Person or any of its Affiliates receives from any of the foregoing or from any multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) to which such Person or any of its Affiliate is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal liability or an event or condition that could, in the aggregate, result in the imposition of a liability on York and/or any such Affiliate; (vii) at least thirty days before any change in York's or any Originator's name or any other change requiring the amendment of UCC financing statements, a notice setting forth such changes and the effective date thereof; (viii) promptly after York obtains knowledge thereof, notice of any: (A) litigation, investigation or proceeding that may exist at any time between York or any of its Subsidiaries and any Governmental Authority that, if not cured or if adversely determined, as the case may be, would have a Material Adverse Effect; (B) litigation or proceeding adversely affecting such Person or any of its Subsidiaries in which the amount involved is $1,000,000 or more and not covered by insurance or in which injunctive or similar relief is sought; or (C) litigation or proceeding relating to any Transaction Document; (ix) promptly after obtaining knowledge thereof, notice of a material adverse change in the business, operations, property or financial or other condition of the Servicer, the Seller or York or any of its subsidiaries; (x) promptly after the occurrence thereof, notice of any downgrade or withdrawal of any of York's debt ratings (long or short term) by any Rating Agency; (xi) such other information respecting the Receivables or the condition or operations, financial or otherwise, of York or any of its Affiliates as the IV-11 Administrator or any Purchaser Agent may from time to time reasonably request; and (xii) promptly after the occurrence thereof, notice of any material acquisition or investment by York of or in any Person, business or operation. 3. Separate Existence. Each of the Seller and York hereby acknowledges that the Purchasers, the Purchaser Agents, the Administrator and the Liquidity Providers are entering into the transactions contemplated by this Agreement and the other Transaction Documents in reliance upon the Seller's identity as a legal entity separate from York and its Affiliates. Therefore, from and after the date hereof, each of the Seller and York shall take all steps specifically required by the Agreement or reasonably required by the Administrator to continue the Seller's identity as a separate legal entity and to make it apparent to third Persons that the Seller is an entity with assets and liabilities distinct from those of York and any other Person, and is not a division of York, its Affiliates or any other Person. Without limiting the generality of the foregoing and in addition to and consistent with the other covenants set forth herein, each of the Seller and York shall take such actions as shall be required in order that: (a) The Seller will be a limited purpose limited liability company whose primary activities are restricted in its limited liability company agreement to: (i) purchasing or otherwise acquiring from the Originators, owning, holding, granting security interests or selling interests in Pool Assets, (ii) entering into agreements for the selling and servicing of the Receivables Pool, and (iii) conducting such other activities as it deems necessary or appropriate to carry out its primary activities; (b) The Seller shall not engage in any business or activity, or incur any indebtedness or liability, other than as expressly permitted by the Transaction Documents; (c) Not less than one member of the Seller's Board of Directors (the "Independent Director") shall be an individual who is not a direct, indirect or beneficial stockholder, officer, director, employee, affiliate, associate or supplier of York or any of its Affiliates. The limited liability company agreement of the Seller shall provide that: (i) the Seller's Board of Directors shall not approve, or take any other action to cause the filing of, a voluntary bankruptcy petition with respect to the Seller unless the Independent Director shall approve the taking of such action in writing before the taking of such action, and (ii) such provision cannot be amended without the prior written consent of the Independent Director; (d) The Independent Director shall not at any time serve as a trustee in bankruptcy for the Seller, York or any Affiliate thereof; (e) Any employee, consultant or agent of the Seller will be compensated from the Seller's funds for services provided to the Seller. The Seller will not engage any agents other than its attorneys, auditors and other professionals, and a servicer and any other agent contemplated by the Transaction Documents for the Receivables Pool, which IV-12 servicer will be fully compensated for its services by payment of the Servicing Fee, and a manager, which manager will be fully compensated from the Seller's funds; (f) The Seller will contract with the Servicer to perform for the Seller all operations required on a daily basis to service the Receivables Pool. The Seller will pay the Servicer the Servicing Fee pursuant to the Agreement. The Seller will not incur any material indirect or overhead expenses for items shared with York (or any other Affiliate thereof) that are not reflected in the Servicing Fee. To the extent, if any, that the Seller (or any Affiliate thereof) shares items of expenses not reflected in the Servicing Fee or the manager's fee, such as legal, auditing and other professional services, such expenses will be allocated to the extent practical on the basis of actual use or the value of services rendered, and otherwise on a basis reasonably related to the actual use or the value of services rendered; it being understood that York shall pay all expenses relating to the preparation, negotiation, execution and delivery of the Transaction Documents, including legal, agency and other fees; (g) The Seller's operating expenses will not be paid by York or any other Affiliate thereof; (h) All of the Seller's business correspondence and other communications shall be conducted in the Seller's own name and on its own separate stationery; (i) The Seller's books and records will be maintained separately from those of York and any other Affiliate thereof; (j) All financial statements of York or any Affiliate thereof that are consolidated to include Seller will contain detailed notes clearly stating that: (i) a special purpose limited liability company exists as a Subsidiary of York, and (ii) the Originators have sold receivables and other related assets to such special purpose Subsidiary that, in turn, has sold undivided interests therein to certain financial institutions and other entities; (k) The Seller's assets will be maintained in a manner that facilitates their identification and segregation from those of York or any Affiliate thereof; (l) The Seller will strictly observe organizational formalities in its dealings with York or any Affiliate thereof, and funds or other assets of the Seller will not be commingled with those of York or any Affiliate thereof except as permitted by the Agreement in connection with servicing the Pool Receivables. The Seller shall not maintain joint bank accounts or other depository accounts to which York or any Affiliate thereof (other than York in its capacity as the Servicer) has independent access. The Seller is not named, and has not entered into any agreement to be named, directly or indirectly, as a direct or contingent beneficiary or loss payee on any insurance policy with respect to any loss relating to the property of York or any Subsidiary or other Affiliate of York. The Seller will pay to the appropriate Affiliate the marginal increase or, in the absence of such increase, the market amount of its portion of the premium payable with respect to any insurance policy that covers the Seller and such Affiliate; IV-13 (m) The Seller will maintain arm's-length relationships with York (and any Affiliate thereof). Any Person that renders or otherwise furnishes services to the Seller will be compensated by the Seller at market rates for such services it renders or otherwise furnishes to the Seller. Neither the Seller nor York will be or will hold itself out to be responsible for the debts of the other or the decisions or actions respecting the daily business and affairs of the other. The Seller and York will immediately correct any known misrepresentation with respect to the foregoing, and they will not operate or purport to operate as an integrated single economic unit with respect to each other or in their dealing with any other entity; and (n) York shall not pay the salaries of Seller's employees, if any. IV-14 EXHIBIT V TERMINATION EVENTS Each of the following shall be a "Termination Event": (a) (i) the Seller, York, any Originator or the Servicer shall fail to perform or observe any term, covenant or agreement under the Agreement or any other Transaction Document and, except as otherwise provided herein, such failure shall continue for more than 15 Business Days after knowledge or notice thereof, (ii) the Seller or the Servicer shall fail to make when due any payment or deposit to be made by it under the Agreement (without counting any amounts made available in connection with the Take Out Securitization) and such failure shall continue unremedied for one Business Day, (iii) York shall resign as Servicer, and no successor Servicer reasonably satisfactory to the Administrator and the Majority Purchasers shall have been appointed, (iv) the Seller shall have breached any of its covenants and agreements set forth in the first sentence of paragraph 1(b), or in paragraphs 1(d), 1(e), 1(f), 1(i), 1(j), 1(l), 1(m), 1(n) or paragraph 3 of Exhibit IV to the Agreement, after giving effect to any applicable cure period, if any, expressly set forth therein, and solely to the extent that no cure period is set forth in the related paragraph, the applicable cure period shall be 5 Business Days or (v) York or the Servicer shall have breached any of its covenants and agreements set forth in the first sentence of paragraph 2(b), or in paragraphs 2(d), 2(g) or 2(h) or paragraph 3 of Exhibit IV to the Agreement, after giving effect to any applicable cure period, if any, expressly set forth therein, and solely to the extent that no cure period is set forth in the related paragraph, the applicable cure period shall be 5 Business Days; (b) York (or any Affiliate thereof) shall fail to transfer to any successor Servicer when required any rights pursuant to the Agreement that York (or such Affiliate) then has as Servicer; (c) any representation or warranty made or deemed made by the Seller, the Servicer, York or any Originator (or any of their respective officers) under or in connection with the Agreement or any other Transaction Document, or any information or report (other than in any Information Package) delivered by the Seller, the Servicer, York or any Originator pursuant to the Agreement or any other Transaction Document, shall prove to have been incorrect or untrue in any respect when made or deemed made or delivered; provided, however, if the violation of this paragraph (c) by the Seller, the Servicer or any Originator may be cured without any potential or actual detriment to the Issuer, the Administrator or any Program Support Provider, the Seller, the Servicer, York, or such Originator, as applicable, shall have 15 Business Days from the earlier of (i) such Person's actual knowledge of such failure and (ii) notice to such Person of such failure to so cure any such violation before a Termination Event shall occur so long as such Person is diligently attempting to effect such cure; (d) the Seller or the Servicer shall fail to deliver the Information Package pursuant to the Agreement, and such failure shall remain unremedied for two Business Days; (e) the Agreement or any purchase or reinvestment pursuant to the Agreement shall for any reason: (i) cease to create, or the Purchased Interest shall for any reason cease to be, a valid and enforceable perfected undivided percentage ownership or security interest to the extent V-1 of the Purchased Interest in each Pool Receivable, the Related Security and Collections with respect thereto, free and clear of any Adverse Claim, or (ii) cease to create with respect to the Pool Assets, or the interest of the Administrator (for the benefit of the Purchasers) with respect to such Pool Assets shall cease to be, a valid and enforceable first priority perfected security interest, free and clear of any Adverse Claim; (f) the Seller, York or any Originator shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Seller, York or any Originator seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Seller, York or any Originator shall take any organizational action to authorize any of the actions set forth above in this paragraph (f); (g) (i) (A) the Default Ratio shall exceed 4%, or (B) the Delinquency Ratio shall exceed 13% or (c) the Current Days' Sales Outstanding shall exceed 50 days or (ii) the average for three consecutive calendar months of (A) the Default Ratio shall exceed 3.5%, (B) the Delinquency Ratio shall exceed 12%, or (C) the Dilution Ratio shall exceed 7.25%; (h) a Change in Control shall occur with respect to Seller, any Originator or York; (i) at any time (i) the sum of (A) the Aggregate Investment plus (B) the Total Reserves, exceeds (ii) the sum of (A) the Net Receivables Pool Balance at such time plus (B) the Purchasers' Share of the amount of Collections then on deposit in the Lock-Box Accounts (other than amounts set aside therein representing Discount and Fees), and such circumstance shall not have been cured within five days; (j) (i) York or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any of its Debt that is outstanding in a principal amount of at least $25,000,000 in the aggregate when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement, mortgage, indenture or instrument relating to such Debt (and shall have not been waived); or (ii) any other event shall occur or condition shall exist under any agreement, mortgage, indenture or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement, mortgage, indenture or instrument (and shall have not been waived), if, in either case: (a) the effect of such non-payment, event or condition is to give the applicable debtholders the right (whether acted upon or not) to accelerate the maturity of such Debt, or (b) any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to repay, redeem, purchase V-2 or defease such Debt shall be required to be made, in each case before the stated maturity thereof; (k) either: (i) a contribution failure shall occur with respect to any Benefit Plan sufficient to give rise to a lien under Section 302(f) of ERISA and such failure shall not be cured within 10 days, (ii) the Internal Revenue Service shall file a notice of lien asserting a claim or claims of $250,000 or more in the aggregate pursuant to the Internal Revenue Code with regard to any of the assets of Seller, any Originator, York or any ERISA Affiliate and such lien shall have been filed and not released within 10 days, or (iii) the Pension Benefit Guaranty Corporation shall, or shall indicate its intention in writing to the Seller, any Originator, York or any ERISA Affiliate to, either file a notice of lien asserting a claim pursuant to ERISA with regard to any assets of the Seller, any Originator, York or any ERISA Affiliate or terminate any Benefit Plan that has unfunded benefit liabilities, or any steps shall have been taken to terminate any Benefit Plan subject to Title IV of ERISA so as to result in any liability in excess of $1,000,000 and such lien shall have been filed and not released within 10 days; (l) one or more final judgments for the payment of money shall be entered against the Seller or (ii) one or more final judgments for the payment of money in an amount in excess of $20,000,000, individually or in the aggregate, shall be entered against the Servicer or any Originator on claims not covered by insurance or as to which the insurance carrier has denied its responsibility, and such judgment shall continue unsatisfied and in effect for sixty (60) consecutive days without a stay of execution; or (m) the "Purchase and Sale Termination Date" under and as defined in the Purchase and Sale Agreement shall occur under the Purchase and Sale Agreement or any Originator shall for any reason cease to transfer, or cease to have the legal capacity to transfer, or otherwise be incapable of transferring Receivables to the Seller under the Purchase and Sale Agreement. V-3 EXHIBIT VI SUPPLEMENTAL PERFECTION REPRESENTATIONS, WARRANTIES AND COVENANTS In addition to the representations, warranties and covenants contained in Exhibit III and Exhibit IV hereof, the Seller hereby makes the following additional representations, warranties and covenants: 1. Receivables; Lock-box Accounts. (a) Pool Receivables. The Pool Receivables constitute "accounts", "general intangibles" or "tangible chattel paper", each within the meaning of the applicable UCC. (b) Lock-Box Accounts. Each Lock-Box Account constitutes a "deposit account" within the meaning of the applicable UCC. 2. Creation of Security Interest. The Seller owns and has good and marketable title to the Pool Receivables and Lock-Box Accounts (and the related lock-boxes), free and clear of any Adverse Claim. The Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in the Pool Receivables and the Lock-Box Accounts (and the related lock-boxes) in favor of the Administrator (for the benefit of the Purchasers), which security interest is prior to all other Adverse Claims and is enforceable as such as against any creditors of and purchasers from the Seller. 3. Perfection. (a) General. The Seller has or has caused, or will or will cause within ten days after the date hereof, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the sale of the Pool Receivables from the Originators to the Seller pursuant to the Purchase and Sale Agreement and the security interest granted by the Seller to the Administrator (for the benefit of the Purchasers) in the Receivables and Lock-Box Accounts (and the related lock-boxes) hereunder. (b) Tangible Chattel Paper. With respect to any Pool Receivable that constitutes "tangible chattel paper", the Servicer is in possession of the original copies of the tangible chattel paper that constitute or evidence such Pool Receivables, and the Seller has filed and has caused each Originator to file, or will file or will cause each Originator to file within ten days after the date hereof, the financing statements described in paragraph (a) above, each of which will contain a statement that: "A purchase of or a grant of a security interest in any property described in this financing statement will violate the rights of the Administrator." The Pool Receivables to the extent they are evidenced by "tangible chattel paper" do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Seller or the Administrator. (c) Lock-Box Accounts. With respect to all Lock-Box Accounts (and all related lock-boxes), the Seller has delivered to the Administrator, on behalf of the Purchasers, a fully executed Lock-Box Agreement pursuant to which the applicable Lock-Box Bank has agreed, following the occurrence and continuation of a Termination Event, to comply with all VI-4 instructions given by the Administrator with respect to all funds on deposit in such Lock-Box Account (and all funds sent to the respective lock-box), without further consent by the Seller or the Servicer. 4. Priority. (a) Other than the transfer of the Receivables by the Originators to the Seller pursuant to the Purchase and Sale Agreement and the grant of security interest by the Seller to the Administrator (for the benefit of the Purchasers) in the Pool Receivables and Lock-Box Accounts (and the related lock-boxes) hereunder, neither the Seller nor any Originator has pledged, assigned, sold, conveyed, or otherwise granted a security interest in any of the Pool Receivables or Lock-Box Accounts (and the related lock-boxes) to any other Person. (b) Neither the Seller nor any Originator has authorized, or is aware of, any filing of any financing statement against the Seller or any Originator that include a description of collateral covering the Pool Receivables or any other Pool Assets, other than any financing statement filed pursuant to the Purchase and Sale Agreement and the Agreement or financing statements that have been validly terminated prior to the date hereof. (c) The Seller is not aware of any judgment, ERISA or tax lien filings against either the Seller or any Originator. (d) None of the Lock-Box Accounts (and the related lock-boxes) are in the name of any Person other than the Seller or the Administrator. Neither the Seller, the Servicer or any Originator has consented to any Lock-Box Bank's complying with instructions of any person other than the Administrator. 5. Survival of Supplemental Representations. Notwithstanding any other provision of the Agreement or any other Transaction Document, the representations contained in this Exhibit VI shall be continuing, and remain in full force and effect until such time as all the Investment has finally been paid in full and all other obligations of the Seller under the Agreement or any other Transaction Documents have been fully performed. 6. No Waiver. The parties to the Agreement: (i) shall not, without obtaining a written confirmation of the then-current rating of the Notes by the rating agencies then rating the Notes, waive any of the representations set forth in this Exhibit VI; (ii) shall provide the ratings agencies rating the Notes with prompt written notice of any breach of any representations set forth in this Exhibit VI, and (iii) shall not, without obtaining a written confirmation of the then-current rating of the Notes by the rating agencies then rating the Notes (as determined after any adjustment or withdrawal of the ratings following notice of such breach) waive a breach of any of the representations set forth in this Exhibit VI. 7. Seller or Servicer to Maintain Perfection and Priority. In order to evidence the interests of the Administrator under this Agreement, the Seller or Servicer shall, from time to time take such action, or execute and deliver such instruments (other than filing financing statements) as may be necessary or advisable (including, without limitation, such actions as are requested by the Administrator on behalf of the Purchasers) to maintain and perfect, as a first-priority interest, the Administrator's security interest (for the benefit of the Purchasers) in the VI-5 Pool Assets. The Seller or Servicer shall, from time to time and within the time limits established by law, prepare and present to the Administrator for the Administrator's authorization and approval all financing statements, amendments, continuations or initial financing statements in lieu of a continuation statement, or other filings necessary to continue, maintain and perfect the Administrator's security interest (for the benefit of the Purchasers in the Pool Assets as a first-priority interest. The Administrator's approval of such filings shall authorize the Seller or Servicer to file such financing statements under the UCC without the signature of the Seller, any Originator or the Administrator where allowed by applicable law. Notwithstanding anything else in the Transaction Documents to the contrary, neither the Seller, the Servicer, nor any Originator, shall have any authority to file a termination, partial termination, release, partial release or any amendment that deletes the name of a debtor or excludes collateral of any such financing statements, without the prior written consent of the Administrator, on behalf of the Purchasers. VI-6 SCHEDULE I CREDIT AND COLLECTION POLICY [to be inserted] Schedule I-1 SCHEDULE II LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS Lock-Box Bank Lock-Box(es) Account Schedule II-1 SCHEDULE III TRADE NAMES Organizational Name Trade Names / Fictitious Names York Receivables Funding LLC None Schedule III-1 ANNEX A TO AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT INITIAL INFORMATION PACKAGE [to be inserted] Annex A-1 ANNEX B TO AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT FORM OF PURCHASE NOTICE May 12, 2004 The Bank of Tokyo-Mitsubishi, Ltd., New York Branch, as Administrator and as a Purchaser Agent 1251 Avenue of the Americas New York, New York 10020-1104 The Bank of Nova Scotia, as a Purchaser Agent One Liberty Plaza New York, New York 10006 Ladies and Gentlemen: Reference is hereby made to the Amended and Restated Receivables Purchase Agreement, dated as of May 17, 2004, (as heretofore amended, amended and restated, supplemented or otherwise modified, the "Receivables Purchase Agreement"), among York Receivables Funding LLC ("Seller "), York International Corporation, as Servicer, Gotham Funding Corporation, Liberty Street Funding Corp., The Bank of Nova Scotia, the various other Purchaser Groups from time to time a party thereto and The Bank of Tokyo-Mitsubishi, Ltd., New York Branch, (the "Administrator"). Capitalized terms used in this Purchase Notice and not otherwise defined herein shall have the meanings assigned thereto in the Receivables Purchase Agreement. This letter constitutes a Purchase Notice pursuant to Section 1.2(a) of the Receivables Purchase Agreement. Seller desires to sell an undivided variable interest in a pool of receivables on ___________, [2004], for a purchase price of $____________. Subsequent to this Purchase, the Aggregate Investment will be $___________. Each Purchaser's Purchaser Group Ratable Share of such Purchase is set forth on Schedule I attached hereto. Seller hereby represents and warrants as of the date hereof, and as of the date of Purchase, as follows: (i) the representations and warranties contained in Exhibit III of the Receivables Purchase Agreement are correct on and as of such dates as though made on and as of such dates and shall be deemed to have been made on such dates; (ii) no Termination Event or Unmatured Termination Event has occurred and is continuing, or would result from such purchase; (iii) after giving effect to the purchase proposed hereby, the Purchased Interest will not exceed 100% and the Aggregate Investment will not exceed the Purchase Limit; and (iv) the Facility Termination Date shall not have occurred. Annex B-1 IN WITNESS WHEREOF, the undersigned has caused this Purchase Notice to be executed by its duly authorized officer as of the date first above written. YORK RECEIVABLES FUNDING LLC By:_______________________________ Name Printed:_____________________ Title:____________________________ Annex B-2 SCHEDULE I TO PURCHASE NOTICE Purchaser Group Purchaser Ratable Share Annex B-3 ANNEX C TO AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT FORM OF ASSUMPTION AGREEMENT THIS ASSUMPTION AGREEMENT (this "Agreement"), dated as of [______ __, ____], is among YORK RECEIVABLES FUNDING LLC (the "Seller"), [________], as purchaser (the "[_____]Conduit Purchaser"), [________], as the related committed purchaser (the "[______] Related Committed Purchaser" and together with the Conduit Purchaser, the "[_____] Purchasers"), and [________], as agent for the Purchasers (the "[______] Purchaser Agent" and together with the Purchasers, the "[_______] Purchaser Group"). BACKGROUND The Seller and various others are parties to a certain Amended and Restated Receivables Purchase Agreement, dated as of May 17, 2004 (as amended, amended and restated, supplemented or otherwise modified through the date hereof, the "Receivables Purchase Agreement"). Capitalized terms used and not otherwise defined herein have the respective meaning assigned to such terms in the Receivables Purchase Agreement. NOW, THEREFORE, the parties hereto hereby agree as follows: SECTION 1. This letter constitutes an Assumption Agreement pursuant to Section 1.2(e) of the Receivables Purchase Agreement. The Seller desires [the [_____] Purchasers] [the [______] Related Committed Purchaser] to [become Purchasers under] [increase its existing Commitment under] the Receivables Purchase Agreement and upon the terms and subject to the conditions set forth in the Receivables Purchase Agreement, the [________] Purchasers agree to [become Purchasers thereunder] [increase its Commitment in an amount equal to the amount set forth as the "Commitment" under the signature of the [______] Related Committed Purchaser hereto]. Seller hereby represents and warrants to the [________] Purchasers as of the date hereof, as follows: (i) the representations and warranties contained in Exhibit III of the Receivables Purchase Agreement are correct on and as of such dates as though made on and as of such dates and shall be deemed to have been made on such dates; (ii) no Termination Event or Unmatured Termination Event has occurred and is continuing, or would result from such purchase; and (iii) the Facility Termination Date shall not have occurred. SECTION 2. Upon execution and delivery of this Agreement by the Seller and each member of the [______] Purchaser Group, satisfaction of the other conditions to assignment specified in Section 1.2(e) of the Receivables Purchase Agreement (including the consent of the Administrator and each of the other Purchasers party thereto) and receipt by the Administrator of counterparts of this Agreement (whether by facsimile or otherwise) executed by each of the Annex C-1 parties hereto, [the [_____] Purchasers shall become a party to, and have the rights and obligations of Purchasers under, the Receivables Purchase Agreement] [the [______] Related Committed Purchaser shall increase its Commitment in the amount set forth as the "Commitment" under the signature of the [______] Related Committed Purchaser, hereto]. SECTION 3. Each party hereto hereby covenants and agrees that it will not institute against, or join any other Person in instituting against, any Conduit Purchaser, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and one day after the latest maturing Notes issued by such Conduit Purchaser is paid in full. The covenant contained in this paragraph shall survive any termination of the Receivables Purchase Agreement. SECTION 4. THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement may not be amended, supplemented or waived except pursuant to a writing signed by the party to be charged. This Agreement may be executed in counterparts, and by the different parties on different counterparts, each of which shall constitute an original, but all together shall constitute one and the same agreement. (continued on following page) Annex C-2 IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their duly authorized officers as of the date first above written. [___________], as a Conduit Purchaser By:_____________________________________________________ Name Printed:___________________________________________ Title:__________________________________________________ [Address] [___________], as a Related Committed Purchaser By:_____________________________________________________ Name Printed:___________________________________________ Title:__________________________________________________ [Address] [Commitment] [_____________], as Purchaser Agent for [_________] By:_____________________________________________________ Name Printed:___________________________________________ Title:__________________________________________________ [Address] S-1 YORK RECEIVABLES FUNDING LLC, as Seller By:____________________________ Name Printed:____________________ Title:___________________________ Consented and Agreed: THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH, as Administrator By:____________________________ Name Printed:____________________ Title:___________________________ Consented and Agreed: [THE PURCHASERS] S-2 ANNEX D TO AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT FORM OF TRANSFER SUPPLEMENT WITH RESPECT TO YORK RECEIVABLES FUNDING LLC AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT [_______ __, ______] Section 1. [Commitment assigned: $_________ Assignor's remaining Commitment: $_________ Investment allocable to Commitment assigned: $_________ Investment assigned:](1) Assignor's remaining Investment: $_________ Discount (if any) allocable to Investment assigned: $_________ Discount(if any) allocable to Assignor's remaining Investment: $_________ Section 2. Effective Date of this Transfer Supplement: [__________] Upon execution and delivery of this Transfer Supplement by transferee and transferor and the satisfaction of the other conditions to assignment specified in [Section 6.3(c)] [Section 6.3(e)] of the Receivables Purchase Agreement, from and after the effective date specified above, the transferee shall become a party to, and have the rights and obligations of a [Conduit Purchaser] [Related Committed Purchaser] under, the Amended and Restated Receivables Purchase Agreement, dated as of May 17, 2004 (as amended, amended and restated, supplemented or otherwise modified through the date hereof, the "Receivables Purchase Agreement"), among YORK RECEIVABLES FUNDING LLC, YORK INTERNATIONAL CORPORATION and various other parties. - ---------- (1) Bracketed language is only applicable to assignments by Related Committed Purchasers pursuant to Section 6.3(c). Annex D-1 ASSIGNOR: [_________], as a [Related Committed Purchaser for [_______]] [Conduit Purchaser] By: ___________________________________ Name:______________________________ Title:_____________________________ ASSIGNEE: [_________], as a [Related Committed Purchaser for [_______]] [Conduit Purchaser] By: ___________________________________ Name:______________________________ Title:_____________________________ [Address] [Commitment Assigned](2) - ---------- (2) Bracketed language is only applicable to assignments by Related Committed Purchasers pursuant to Section 6.3(c). Annex D-2 Accepted as of date first above written: [___________], as Purchaser Agent for the [______] Purchaser Group By: _______________________________________________ Name:__________________________________________ Title:_________________________________________ Annex D-3 ANNEX E TO AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT FORM OF PAYDOWN NOTICE [_____________, 20___] The Bank of Tokyo-Mitsubishi, Ltd., New York Branch 1251 Avenue of the Americas New York, New York 10020-1104 Attention: Securitization Group The Bank of Nova Scotia One Liberty Plaza New York, New York 10006 Attention: Norman Last Ladies and Gentlemen: Reference is hereby made to the Amended and Restated Receivables Purchase Agreement, dated as of May 17, 2004 (as heretofore amended, amended and restated, supplemented or otherwise modified, the "Receivables Purchase Agreement"), among York Receivables Funding LLC ("Seller"), York International Corporation, as Servicer, Gotham Funding Corporation, Liberty Street Funding Corp., The Bank of Nova Scotia, the various other Purchaser Groups from time to time a party thereto and The Bank of Tokyo-Mitsubishi, Ltd., New York Branch (the "Administrator"). Capitalized terms used in this Purchase Notice and not otherwise defined herein shall have the meanings assigned thereto in the Receivables Purchase Agreement. This letter constitutes a Paydown Notice pursuant to Section 1.4(f)(i) of the Receivables Purchase Agreement. Seller desires to reduce the Aggregate Investment on ______________, ___ by(3) the application of $____________ in cash to pay the Aggregate Investment and Discount to accrue (until such cash can be used to pay commercial paper notes) with respect to such Aggregate Investment, together with all cost related to such reduction of Aggregate Investment. - ---------- (3) Notice must be given at least three Business Days' prior to the requested paydown date, in the case of reductions greater than $10,000,000, or at least two Business Days prior to the requested paydown date, in case of reductions less than or equal to $10,000,000. Annex E-1 IN WITNESS WHEREOF, the undersigned has caused this Paydown Notice to be executed by its duly authorized officer as of the date first above written. YORK RECEIVABLES FUNDING LLC By:_______________________________ Name Printed:_____________________ Title:____________________________ Annex E-2 ANNEX F TO AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT LIST OF ELIGIBLE FOREIGN OBLIGOR COUNTRIES - - Australia - - Canada - - France - - Hungary - - Italy - - Japan - - Korea - - Poland - - Spain - - Sweden Annex G-1 EX-10.1 3 w99481exv10w1.txt AMENDED AND RESTATED 2002 INCENTIVE COMPENSATION PLAN EXHIBIT 10.1 YORK INTERNATIONAL CORPORATION 2002 INCENTIVE COMPENSATION PLAN (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2004) The purpose of the York International Corporation 2002 Incentive Compensation Plan (the "Plan") is to give certain management and key employees who are in a position to contribute materially to the success and profitability of York International Corporation (the "Company") an incentive and reward for doing so; and to assist the Company in attracting and retaining the highest caliber of management and key employees. This will be accomplished through incentive compensation in the form of annual awards and mid-term performance awards. ARTICLE 1 - DEFINITIONS. For purposes of the Plan, the following terms shall have the meaning indicated: 1.1. Annual Award - the annual award granted a Participant under the Annual Program. 1.2. Annual Performance Objectives - the performance objectives set forth in Section 3.2 used to determine Annual Awards. 1.3. Annual Program - the annual program portion of the Plan set forth in Article 3. 1.4. Annual Target Bonus - the annual target bonus amount under Article 3 for a Participant for a Fiscal Year. 1.5. Board - The Board of Directors of York International Corporation. 1.6. Change in Control - any one or more of the following: (a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (A) and (B) of subsection (c) of this Section 1.6; or (b) individuals who, as of the date hereof, constitute the Board (the "Incumbent Board') cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person or entity other than the Board; or (c) consummation of a reorganization, merger or consolidation involving the Company or any subsidiary of the Company or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) either (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including without limitation, a corporation which as a result of such transactions owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock or (ii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or at the time of the action of the Board, providing for such Business Combination and (B) no person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; or (d) a complete liquidation or dissolution of the Company. 1.7. Code - the Internal Revenue Code of 1986, as amended. 1.8. Company - York International Corporation and except for purposes of Sections 1.6 and 1.13, any other company which is a subsidiary within the meaning of Section 424(f) of the Code with respect to York International Corporation. 1.9. Compensation Committee - the compensation committee of the Board appointed by the Board that is solely composed of two or more persons who are "outside directors" in accordance with the meaning of Treasury Regulation Section 1.162-27(e)(3), "disinterested persons" in accordance with the meaning set forth in Rule 16b-3 of the Exchange Act and meet the requirements for "independence" within the meaning of any applicable stock exchange or securities self regulatory organization rule. 1.10. Covered Employee - any individual who is, or is determined by the Board to be likely to become, a "covered employee" within the meaning of Section 162(m) of the Code, as amended. 1.11. Disability - an inability to perform the duties assigned by the Company to the Participant by reason of any medically determined physical or mental impairment which has lasted for a continuous period of more than six months. 1.12. Effective Date - January 1, 2002. This amendment and restatement is effective January 1, 2004. 1.13. Fiscal Year - the fiscal year of the Company. 1.14. Management Stock Purchase Plan - the York International Corporation Management Stock Purchase Plan in effect from time to time. 1.15. Measurement Period - three consecutive Fiscal Years or such other period selected and established by the Compensation Committee with respect to any Mid-Term Program. 1.16. Mid-Term Target Bonus - the mid-term target bonus amount under Article 4 for a Participant for a Measurement Period. 1.17. Mid-Term Award - the award earned by a Participant under the Mid-Term Program at the end of a Measurement Period. 1.18. Mid-Term Performance Objectives - the performance objectives set forth in Section 4.2 used to determine Mid-Term Award. 1.19. Mid-Term Program - the mid-term program portion of the Plan set forth in Article 4. 1.20. Omnibus Stock Plan - the York International Corporation 2002 Omnibus Stock Plan, in effect from time to time. 1.21. Participant - an individual eligible to participate in the Plan in accordance with Article 2. 1.22. Plan - The York International Corporation 2002 Incentive Compensation Plan. 1.23. Retirement - termination of employment with the Company on or after the date the employee either attains 62 years of age or attains 55 years of age and completes 5 years of service or a retirement with the approval of the Board of Directors. 1.24. Termination of Employment - a termination of employment with the Company other than by reason of death, incurring a Disability, or Retirement. 1.25. Termination for Cause - a Termination of Employment if the employee was terminated for (i) providing the Company with materially false representations relied upon by the Company in furnishing information to shareholders, a stock exchange or the Securities and Exchange Commission, (ii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Company, (iii) misconduct causing a serious violation by the Company of state or federal laws, (iv) theft of Company funds or assets, or (v) conviction of a crime involving moral turpitude. ARTICLE 2 - ELIGIBILITY. (a) An individual shall be eligible for the Annual Program if he is (i) a Covered Employee or (ii) a management or key employee who is approved by the Compensation Committee to participate in the Annual Program for the specified Fiscal Year. (b) An individual who is hired or has changed position after the beginning of the Fiscal Year shall be eligible for the Annual Program if he is a management or key employee who is approved by the Compensation Committee to participate in the Annual Program for the specified Fiscal Year. Such a Participant shall be entitled to a pro-rated Annual Cash Award as described in Section 3.3(c) for that Fiscal Year payable in the same form and at the same time as Annual Cash Awards are paid to other Participants. (c) An individual shall be eligible for the Mid-Term Program if he is (i) a Covered Employee or (ii) a management or key employee who is approved by the Compensation Committee to participate in the Mid-Term Program for the specified Measurement Period. An individual who previously received an award under the Mid-Term Program, but is not currently eligible to do so will nonetheless participate in the Mid-Term Program with respect to any Mid-Term Award previously granted until such Mid-Term Award is paid out or such Mid-Term Award expires. (d) An individual who is hired or has changed position after the beginning of a Measurement Period shall be eligible for the Mid-Term Program if he is a management or key employee who is approved by the Compensation Committee to participate in the Mid-Term Program for the specified Measurement Period. Such a Participant shall be entitled to a pro-rated Mid-Term Award as described in Section 4.3(c) for that Measurement Period payable in the same form and at the same time as Mid-Term Awards are paid to other Participants for that Measurement Period. ARTICLE 3 - ANNUAL PROGRAM. 3.1. Annual Award Grants (a) Annual Awards shall be determined in accordance with pre-established Annual Performance Objectives as described in Section 3.2. Once established, the Compensation Committee shall not have discretion to modify the terms of the Annual Awards, except that the Compensation Committee shall have the discretion to reduce the payout under any Annual Award, if in the sole judgment of the Compensation Committee, the amount of such payout does not reflect the design intentions of the Plan. It is intended that all Annual Awards under the Plan to Covered Employees will satisfy the requirements for deductibility under Section 162(m) of the Code. (b) Not later than 90 days after the beginning of the Fiscal Year (or, if earlier, the date as of which 25% of the Participant's period of service for the Fiscal Year has elapsed), the Compensation Committee will approve the Annual Target Bonus for each Participant's Annual Award. The Annual Target Bonus will be based on several factors, including market competitive data, job responsibilities, the aggressiveness of the financial budget relative to prior year performance and market conditions and other factors considered relevant by the Compensation Committee. The Compensation Committee shall approve in writing a schedule setting forth the percentage of Annual Target Bonus payable based on the level of performance objectives achieved. (c) At the end of a Fiscal Year the Compensation Committee shall approve the payment to each Participant of his Annual Award, if any. The Annual Award shall be based on the degree to which the predetermined Annual Performance Objectives for that Fiscal Year are achieved. Prior to the payment of any Annual Awards the Compensation Committee shall certify the degree of achievement of the applicable Annual Performance Objective. The maximum amount payable to any individual Participant as an Annual Award for a Fiscal Year shall be $4,000,000. 3.2. Annual Performance Objectives. Annual Performance Objectives shall be developed through the Company's business planning process and shall be approved by the Compensation Committee in writing not later than 90 days after the beginning of the Fiscal Year. The Annual Performance Objectives shall be composed of one or more of the following: fully diluted earnings per share, Corporate or Division earnings before interest and taxes (with or without a pro forma charge for the cost of capital) in absolute dollars or as a percentage of sales, revenue, sales, profit after tax, gross profit, operating profit, unit volume, return on equity, changes in working capital, return on capital, cash flow, total shareholder return, return on net capital employed, average net capital as a percent of sales, manufacturing efficiency, new product development project milestone dates, information technology systems implementation project milestone dates, cost of quality, purchase price variance or, for Participants other than Covered Employees, other objectively measurable goals approved by the Compensation Committee. In establishing the goals, the Compensation Committee will keep in mind the requirement of Reg. Section 1.162-27(e)(2) that the outcome must be substantially uncertain at the time the Annual Performance Objectives are established. The Compensation Committee will determine whether the attainment of Annual Performance Objectives will be impacted by extraordinary, unusual, or non-recurring items or changes in Generally Accepted Accounting Principles. A different combination of goals may be used for different Participants or different positions (including differences between Corporate and Division positions). The goals used may vary for each Fiscal Year. However, the specific goals to be used for a Participant or a class of Participants for a specific Fiscal Year shall be approved in writing by the Compensation Committee. 3.3. Forfeitability of Annual Award. (a) Except as provided in Section 3.3(b) and Article 5, a Participant must remain employed by the Company until the last day of the Fiscal Year to receive his Annual Award, if any. If a Participant has a termination of Employment which is a Termination for Cause or which is voluntary prior to the end of the Fiscal Year, all rights to the Annual Award for that Fiscal Year shall be forfeited. (b) If a Participant dies, incurs a Disability, has a Retirement or has a Termination of Employment other than a termination described in 3.3(a) before the end of the Fiscal Year or takes an unpaid leave of absence of longer than 30 days during the Fiscal Year, then such Participant shall be entitled to a pro-rated Annual Award for that Fiscal Year as described in Section 3.3(c), payable at the same time applicable to other Participants. (c) The amount of the pro-rated Annual Award referred to in Section 3.3(b) shall be equal to the product of (i) the amount of the Annual Award for that Participant determined under Section 3.1 and 3.2 and (ii) a fraction, the numerator of which is the number of completed calendar months of service performed (in the case of a Disability, the number of completed months through the date of Disability) by the Participant for the Fiscal Year and the denominator of which is twelve. 3.4 Payment of Annual Award. Subject to Section 3.5, a Participant's Annual Award for a Fiscal Year shall be paid in a single cash payment within 75 days of the end of that Fiscal Year; provided, however, that any award in excess of 100% of a Participant's Annual Target Bonus may be paid in the Company's common stock to be issued under the Omnibus Stock Plan or in a combination of cash and common stock, in the sole discretion of the Compensation Committee. 3.5 Deferral of Annual Award. A Participant may elect to defer a portion or all of his or her Annual Award under the terms of the Management Stock Purchase Plan. ARTICLE 4 - MID-TERM PROGRAM. 4.1. Mid-Term Award Grants. (a) Mid-Term Awards shall be determined in accordance with pre-established Mid-Term Performance Objectives as described in Section 4.2. Once established, the Compensation Committee shall not have discretion to modify the terms of the Mid-Term Awards, except that the Compensation Committee shall have the discretion to reduce the payout under any Mid-Term Award, if in the sole judgment of the Compensation Committee, the amount of such payout does not reflect the design intentions of the Plan. It is intended that all payments hereunder to Covered Employees will satisfy the requirements for deductibility under Section 162(m) of the Code. (b) The Mid-Term Target Bonus for each Participant's Mid-Term Award for the Measurement Period shall be approved by the Compensation Committee no later than 90 days after the commencement of the Participant's period of service during the Measurement Period. The Mid-Term Target Bonus will be based on several factors, including market competitive data, job responsibilities and market conditions and other factors considered relevant by the Compensation Committee. The Mid-Term Award shall be based on the degree to which the predetermined Mid-Term Performance Objectives for that Measurement Period are achieved. The Compensation Committee shall approve in writing a schedule setting forth the percentage of Mid-Term Target Bonus payable based on the level of performance objective achieved. (c) At the end of the Measurement Period, the Compensation Committee shall approve the payment to each Participant of his Mid-Term Award, if any. Prior to the payment of any Mid-Term Awards, the Compensation Committee shall certify that degree of achievement of the applicable Mid-Term Performance Objectives. The maximum amount payable to any individual Participant as a Mid-Term Award for a given Measurement Period is $3,000,000. 4.2. Mid-Term Performance Objectives. The Mid-Term Performance Objectives shall be developed through the Company's business planning process and shall be approved by the Compensation Committee in writing not later than 90 days after the beginning of the Measurement Period to which they apply. The Mid-Term Performance Objectives shall be composed of one or more of the following: cumulative earnings per share over a specified period, fully diluted earnings per share, Corporate or Division earnings before interest and taxes (with or without a pro forma charge for the cost of capital) in absolute dollars or as a percentage of sales, revenue, sales, profit after tax, gross profit, operating profit, unit volume, return on equity, changes in working capital, Corporate or Division return on net capital employed, cash flow, total shareholder return, total return to shareholders as compared to a relevant index of publicly traded companies as approved by the Compensation Committee or, for Participants other than Covered Employees, other objectively measurable goals approved by the Compensation Committee. The Compensation Committee will determine whether the achievement of Mid-Term Performance Objectives will be impacted by any extraordinary, unusual or non-recurring items or changes in Generally Accepted Accounting Principles. In establishing the goals, the Compensation Committee will keep in mind the requirements of Reg. Section 1.162-27(e)(2) that the outcome must be substantially uncertain at the time the Mid-Term Performance Objectives are established. A different combination of goals may be used for different Participants or different positions (including differences between corporate and division positions). The goals used may vary for each Measurement Period. However, the specific goals to be used for a Participant or a class of Participants for a specific Measurement Period shall be approved in writing by the Compensation Committee. 4.3. Forfeitability of the Mid-Term Award. (a) Except as provided in Section 4.3(b) and Article 5, a Participant must remain employed by the Company until the end of the applicable Measurement Period to receive his Mid-Term Award. If the Participant has a Termination of Employment which is a Termination for Cause or which is voluntary prior to the end of the applicable Measurement Period, all rights to the Mid-Term Award shall be forfeited. (b) If a Participant dies, incurs a Disability, has a Retirement or has a termination of Employment other than a termination described in Section 4.3(a) before the end of the applicable Measurement Period or takes an unpaid leave of absence of longer than 30 days during the Measurement Period, then such Participant shall be entitled to a pro-rated Mid-Term Award for the Measurement Period, as described in Section 4.3(c). (c) The amount of the pro-rated Mid-Term Award referred to in Section 4.3(b) shall be equal to the product of (i) the amount of the Mid-Term Award for that Participant determined under Section 4.1 and 4.2 and (ii) a fraction, the numerator of which is the number of completed calendar months of service performed (in the case of a Disability, the number of completed months through the date of Disability) by the Participant for the Measurement Period and the denominator of which is the number of months in the Measurement Period. 4.4. Payment of Mid-Term Award. Subject to Section 4.5, the payment of the Mid-Term Award, if any, will be made in cash within 75 days after the end of the Measurement Period, provided, however, that any award in excess of 100% of a Participant's Mid-Term Target Bonus may be paid in the Company's common stock to be issued under the Omnibus Stock Plan or in a combination of cash and common stock, in the sole discretion of the Compensation Committee. 4.5 Deferral of Mid-Term Award. A Participant may elect to defer a portion or all of his or her Mid-Term Award under the terms of the Management Stock Purchase Plan. ARTICLE 5 - CHANGE IN CONTROL. 5.1. Effect of Change in Control. In the event of a Change in Control, the Plan shall terminate and the Participants' right to receive an Annual Cash Award and Mid-Term Awards under the Annual Program and any Mid-Term Programs then in effect shall be measured as of the end of the fiscal month immediately preceding the date of the Change in Control pursuant to Sections 5.2 and 5.3. 5.2. Measurement of Achievement under Annual Program. (a) To the extent the percentage of an Annual Performance Objective that was anticipated to be achieved as of the date for measurement set forth in Section 5.1 can be ascertained from the financial operating budget on which the Annual Program was based, achievement of such Annual Performance Objective shall be measured based on actual achievement as of such time versus anticipated achievement as of such time. (b) In the event Section 5.2(a) above shall not apply, if any Annual Performance Objective is based on a measure that is not subject to proration, achievement of such Annual Performance Objective shall be measured as of the date set forth in Section 5.1 above. To the extent any Annual Performance Award is capable of proration, achievement of such Annual Performance Objective shall be measured as of the date set forth in Section 5.1 on a prorated basis. The prorated Annual Performance Objective shall be equal to the product of the (i) the Annual Performance Objective and (ii) a fraction, the numerator of which is the number of fiscal months elapsed under the Annual Program and the denominator of which is twelve. 5.3. Measurement of Achievement under Mid-Term Programs. (a) Achievement of that portion of any Mid-Term Awards outstanding as of the date of a Change in Control that is based on performance against an index shall be measured against such index as of the date set forth in Section 5.1 above. (b) To the extent the percentage of a Mid-Term Performance Objective that was anticipated to be achieved as of the date for measurement set forth in Section 5.1 can be ascertained from the long-term plan on which the Mid-Term Program was based, achievement of such Mid-Term Performance Objective shall be measured based on actual achievement as of such time versus anticipated achievement as of such time. (c) In the event that Sections 5.3(a) or 5.3(b) shall not be applicable, if any Mid-Term Performance Objective is based on a measure which is not subject to proration, achievement of such Mid-Term Performance Objective shall be measured as of the date set forth in Section 5.1 above. To the extent any such Mid-Term Performance Objective is capable of proration, achievement of such Mid-Term Performance Objective shall be measured as of the date set forth in Section 5.1 on a prorated basis. The prorated Mid-Term Performance Objective shall be equal to the product of (i) the Mid-Term Performance Objective and (ii) a fraction, the numerator of which is the number of fiscal months elapsed in the Measurement Period and the denominator of which is the total number of fiscal months in the Measurement Period. 5.4. Payment of Awards. To the extent any Annual Award or Mid-Term Award has been earned, based on the methods of measurement set forth in Sections 5.2 and 5.3 above, respectively, such Annual Award or Mid-Term Award shall be payable without any further approval by the Compensation Committee and without proration based on the amount of time elapsed under either the Annual Program or any Mid-Term Program. All payments shall be made as soon as practicable after the Change in Control, but in no event later than forty-five (45) days after the Change in Control. ARTICLE 6 - GENERAL. 6.1. Nonassignability of Incentive Awards. No right under the Plan shall be subject to anticipation, sale, assignment, encumbrance or transfer other than by will or the laws of intestate succession. 6.2. Unsecured Interest. A Participant shall have no interest in any fund or specified asset of the Company. Any amounts which are or may be set aside under the provisions of this Plan shall continue for all purposes to be a part of the general funds of the Company, and no person or entity other than the Company shall, by virtue of the provisions of this Plan, have any interest in such assets. No right to receive payments from the Company pursuant to this Plan shall be greater than the right of any unsecured creditor of the Company. 6.3. No Right or Obligation of Continued Employment. Nothing contained in the Plan shall require the Company or a related company to continue to employ a Participant, nor shall the Participant be required to remain in the employment of the Company or a related company. 6.4. Withholding. The Company shall withhold all required local, state and federal and foreign taxes from the amount of any award. If awards are made in stock, the employee may deliver shares in satisfaction of the tax. 6.5. Amendment and Termination of the Plan. The Plan may be amended or terminated at any time by the Board or by the Compensation Committee as delegated by the Board, provided that such termination or amendment shall not, without the consent of any Participant, affect such Participant's rights with respect to awards previously awarded to him. With the consent of the Participant affected, the Board, or by delegation of authority by the Board, the Committee, may amend outstanding awards in a manner not inconsistent with the Plan. Further, no amendment that would require shareholder approval under Section 162(m) of the Code shall be made without that approval. 6.6. Binding on Successors. The obligations of the Company under the Plan shall be binding upon any organization which shall succeed to all or substantially all of the assets of the Company, and the term "Company," whenever used in the Plan, shall mean and include any such organization after the succession. 6.7. References. Any masculine personal pronoun shall be considered to mean also the corresponding feminine or neuter personal pronoun, as the context requires. 6.8. Applicable Law. The Plan shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania, without reference to principles of conflicts of laws. IN WITNESS WHEREOF, the York International Corporation 2002 Incentive Compensation Plan is, by the authority of the Board of Directors of the Corporation, executed the 23rd day of May, 2002, to be effective from January 1, 2002. Attest YORK INTERNATIONAL CORPORATION _______________________________ By: ___________________________ Secretary [Corporate Seal] EX-10.2 4 w99481exv10w2.txt AMENDED AND RESTATED 2002 OMNIBUS STOCK PLAN EXHIBIT 10.2 YORK INTERNATIONAL CORPORATION AMENDED AND RESTATED 2002 OMNIBUS STOCK PLAN 1. ESTABLISHMENT AND PURPOSE York International Corporation hereby establishes the YORK INTERNATIONAL CORPORATION 2002 OMNIBUS STOCK PLAN (the "Plan"). The Plan permits the grant of incentive stock options, non-statutory stock options, restricted stock awards, stock appreciation rights, performance awards, dividend equivalents and other stock units or any combination of the foregoing. The purpose of the Plan is to promote the growth and profitability of York International Corporation (the "Company") by (i) providing directors, certain officers and other employees of the Company and its subsidiaries with incentives to improve stockholder value and contribute to the success of the Company, and (ii) enabling the Company to attract, retain and reward the best available persons for positions of substantial responsibility. 2. DEFINITIONS "Cause" means the termination of employment of an employee for (i) providing the Company with materially false representations relied upon by the Company in furnishing information to stockholders, a stock exchange or the Securities and Exchange Commission, (ii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Company, (iii) misconduct causing a serious violation by the Company of state or federal laws, (iv) theft of Company funds or assets, or (v) conviction of a crime involving moral turpitude. "Change in Control" shall mean (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (A) and (B) of subsection (c) hereof; or (b) Individuals who, as of the date of the most recent amendment hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date of the most recent amendment hereof - 1 - whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person or entity other than the Board; or (c) Consummation of a reorganization, merger or consolidation involving the Company or any subsidiary of the Company or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) either (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transactions owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock or (ii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or at the time of the action of the Board, providing for such Business Combination and (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; or (d) A complete liquidation or dissolution of the Company. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statut0e. "Disability" means the inability to perform the duties assigned by the Company to the participant by reason of any medically determined physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than six months. "Fair Market Value" of a share of the Company's Common Stock for any purpose shall mean the closing price of the Common Stock on the exchange where the Common Stock is principally traded. If the Common Stock is not traded on an exchange, but is traded in the over-the-counter market, Fair Market Value on the relevant date shall mean the last sale price reported by the National Association of Securities Dealers Automated Quotation Systems ("NASDAQ"), if the Common Stock is included in the National Market System or the average of the closing bid and asked prices reported on the preceding day on which such prices were reported. If the Common Stock is not traded on an exchange or reported by NASDAQ, the Board of Directors shall determine Fair Market Value. In the case of incentive stock options, the Board's determination shall conform to the Treasury Regulations under Section 422 of the Code. "Retirement" means termination of employment on or after the date the participant either attains 62 years of age or attains 55 years of age and completes 5 years of service or a retirement with the approval of the Board of Directors. "Subsidiary" and "subsidiaries" mean only a corporation or corporations within the meaning of the definition of "subsidiary corporation" provided in Section 424(f) of the Code, or any successor thereto of similar import. 3. ADMINISTRATION The Plan shall be administered by the Compensation Committee appointed by the Board of Directors, which shall be composed of not less than two directors of the Company who are both "non-employee directors" within the meaning of Rule 16b-3 of the Securities and Exchange Commission ("Rule 16b-3") and "outside directors" within the meaning of Treasury Regulation Section 1.162-27(e)(3) or any successor rules thereto. The Compensation Committee shall also meet the independence requirements of the applicable stock exchange or other securities self-regulatory organization. The Committee shall, consistent with the provisions of the Plan, be authorized to (i) select persons to participate in the Plan, (ii) determine all terms, conditions and restrictions of grants made under the Plan to each participant, and the conditions and restrictions, if any, subject to which such grants will be made, (iii) modify, extend or renew outstanding grants, accept the surrender of outstanding grants and substitute new grants, provided that no such action shall be taken with respect to any outstanding grant which would adversely affect the participant without his consent, and further provided that, except for adjustments pursuant to Section 17, neither the Board of Directors nor the Committee shall have the authority to reprice any stock option granted under this Plan or to accept the surrender of an outstanding option in consideration for the issuance of a new option with a lower exercise price unless such repricing or issuance has previously been approved by the stockholders of the Company, (iv) interpret the Plan and (v) adopt, amend, or rescind such rules and regulations for carrying out the Plan as it may deem appropriate. Subject to the overall limitation on the number of shares of Common Stock available under the Plan, the Committee may use available shares of Common Stock as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company or a subsidiary, including the plans and arrangements of the Company or a subsidiary assumed in business combinations. The Committee may permit the deferred delivery of any shares of Common Stock under this Plan, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest or dividend equivalents, and may include converting such credits into deferred Common Stock equivalents. Decisions of the Committee on all matters relating to the Plan shall be in the Committee's sole discretion and shall be conclusive and binding on all parties, including the Company, its stockholders and the participants in the Plan. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with applicable federal and state laws and rules and regulations promulgated pursuant thereto. Notwithstanding anything to the contrary herein, the Board of Directors may, in its sole discretion, at any time and from time to time resolve to administer the Plan. In such event, the term "Committee" used herein shall be deemed to mean the Board of Directors. 4. SHARES AVAILABLE FOR THE PLAN; ANNUAL LIMIT ON GRANTS The shares of Common Stock with respect to which grants may be made under the Plan shall be shares currently authorized but unissued or currently held or subsequently acquired by the Company as treasury shares. Subject to adjustments as provided in Section 17, as of any date the total number of shares of Common Stock with respect to which awards may be granted under the Plan shall be equal to 3,750,000 shares, provided that the number of restricted shares or stock units awarded under the Plan may not exceed 3% of the total number of shares of Common Stock outstanding at the time of any such award. Subject to adjustments as contemplated by Section 17, no person may be granted during any one calendar year: (a) more than 300,000 restricted shares, stock units, stock appreciation rights or (b) options to purchase more than 300,000 shares. If any grant under the Plan expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated or canceled as to any shares, the shares subject to such grants shall thereafter be available for further grants under the Plan unless such shares would not be deemed available for future grants pursuant to Rule 16b-3. If the exercise price of any stock option granted under the Plan is satisfied by tendering shares of Common Stock to the Company (by either actual delivery or by attestation), only the number of shares of Common Stock issued net of the shares of Common Stock tendered shall be deemed to have been granted for purposes of determining the number of shares of Common Stock available for grant under the Plan. 5. PARTICIPATION Participation in the Plan shall be limited to directors, officers (including directors who are officers of the Company), and other employees of the Company and its subsidiaries who are recommended by the officers and selected by the Committee. Only directors who are not officers or employees of the Company shall be eligible to participate in Section 10 of the Plan. Nothing in the Plan or in any grant thereunder shall confer any right on an employee to continue in the employ of the Company or shall interfere in any way with the right of the Company to terminate an employee at any time. Stock options, restricted share awards, stock appreciation rights or any combination thereof may be granted to such persons and for such number of shares as the Committee shall determine, subject to the limitations in Section 4. A grant of any type made in any one year to an eligible employee shall neither guarantee nor preclude a further grant of that or any other type to such employee in that year or subsequent years. 6. STOCK OPTIONS Subject to the other applicable provisions of the Plan, the Committee may from time to time grant to eligible participants (including directors who are not officers or employees of the Company ("non-employee directors")) nonqualified stock options. Subject to the other applicable provisions of the Plan, the Company may from time to time grant to eligible employee participants (but not to non-employee directors) incentive stock options as that term is defined in Section 422 of the Code. The options granted hereunder shall be subject to the following terms and conditions: (a) Price. The price per share payable upon the exercise of each option ("exercise price") shall not be less than 100% of the Fair Market Value of the shares on the date the option is granted. Except for adjustments pursuant to Section 17, the exercise price for any outstanding option granted under the Plan may not be decreased after the date of grant nor may an outstanding option granted under the Plan be surrendered to the Company as consideration for the grant of a new option with a lower exercise price unless previously approved by the stockholders of the Company. (b) Payment. Options may be exercised in whole or in part by payment of the exercise price of the shares to be acquired. Payment may be made in cash or, unless otherwise determined by the Committee, in shares of Common Stock (by either actual delivery of shares or by attestation) or a combination of cash and shares of Common Stock. The Fair Market Value of shares of Common Stock delivered on exercise of options shall be determined on the date of exercise. Shares of Common Stock delivered in payment of the exercise price may be previously owned shares acceptable to the Committee. A Participant may elect to pay the exercise price upon the exercise of an Option by authorizing a third party to sell shares of Common Stock acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise. Unless otherwise determined by the Committee, a participant may also deliver Common Stock of the Company, including shares acquired upon exercise of the option, in satisfaction of any amount the Company is required to withhold for taxes in connection with the exercise of an option subject, if the optionee is subject to Section 16(b) of the Exchange Act, to such restrictions as may be imposed from time to time by the Securities and Exchange Commission to comply with Section 16(b). An election to deliver Common Stock to pay withholding taxes must be made on or before the date the amount of tax to be withheld is determined and once made will be irrevocable. The withholding tax obligation that may be paid by the withholding or delivery of shares may not exceed the statutory minimum withholding for federal, state and local tax obligations in connection with the exercise of the option or the sale of shares received upon exercise of the option. The Fair Market Value of the shares to be withheld or delivered will be the Fair Market Value on the date as of which the amount of tax to be withheld is determined. (c) Term of Options. The term during which each option may be exercised shall be determined by the Committee, provided that upon a Change in Control, all outstanding options shall automatically become immediately exercisable. In no event shall an option be exercisable more than ten years from the date it is granted. In accordance with Section 11, the Committee may, at its discretion, establish objective performance measurements that when attained provide for the option to become exercisable. Prior to the exercise of the option and delivery of the stock represented thereby, the optionee shall not have any rights to receive any dividends or be entitled to any voting rights on any stock represented by outstanding options. (d) Restrictions on Incentive Stock Options. The aggregate Fair Market Value (determined as of the grant date) of shares of Common Stock with respect to which all incentive stock options first become exercisable by any participant in any calendar year under this or any other plan of the Company or any related or predecessor corporation of the Company or any related corporation (as defined in the applicable regulations under the Code) may not exceed $100,000 or such higher amount as may be permitted from time to time under Section 422 of the Code. To the extent that such aggregate fair market value shall exceed $100,000, or applicable higher amount, such options shall be treated as options which are not incentive stock options. The exercise price of any incentive stock option granted to a participant who owns (within the meaning of Section 422(b)(6) of the Code, after the application of the attribution rules in Section 424(d) of the Code) more than 10% of the combined voting power of all classes of shares of the Company or any related corporation shall be not less than 110% of the Fair Market Value of the Common Stock on the grant date and the term of such option shall not exceed five years. Incentive stock options can only be issued to employees of the Company. 7. RESTRICTED SHARE AWARDS Subject to the other applicable provisions of the Plan, the Committee may at any time and from time to time award shares of Common Stock to such participants (including non-employee directors) and in such amounts and for such consideration, as it determines. Each award of shares shall specify the applicable restrictions on such shares, the duration of such restrictions, and the time or times at which such restrictions shall lapse, or the performance measurements, in accordance with Section 11, or other objectives upon the achievement of which such restrictions shall lapse, with respect to all or a specified number of shares that are part of the award. The duration of such restrictions shall not be less than three years, except that, in the case of restricted shares with restrictions that lapse based upon performance measures established in accordance with Section 11, the duration of such restrictions shall not be less than one year. The Committee may reduce or shorten the duration of any restriction applicable to any shares awarded to any participant under the Plan only in the event of an unusual, non-recurring situation. Restricted shares may be issued at the time of award, subject to forfeiture if the restrictions do not lapse, or upon lapse of the restrictions. If shares are issued at the time of the award, the participant may be required to deposit the certificates with the Company during the period of any restriction thereon and to execute a blank stock power therefor. Except as otherwise provided by the Committee, during such period of restriction the participant shall have all of the rights of a holder of Common Stock, including but not limited to the rights to receive dividends (or amounts equivalent to dividends) and to vote. If shares are issued upon lapse of restrictions, the Committee may provide that the participant will be entitled to receive any amounts per share pursuant to any dividend or distribution paid by the Company on its Common Stock to stockholders of record after the award and prior to the issuance of the shares. Except as otherwise provided by the Committee, upon termination of a grantee's employment or service due to death or Disability during any period of restriction, any restrictions on shares awarded to such grantee shall lapse. Except as otherwise provided by the Committee, on termination of a grantee's employment or service for any other reason all unvested restricted shares subject to awards made to such grantee shall be forfeited to the Company. 8. STOCK APPRECIATION RIGHTS The Committee may grant stock appreciation rights, entitling the grantee to receive, in cash or stock, value equal to (or otherwise based on) the excess of: (a) the Fair Market Value of a specified number of shares of Common Stock at the time of exercise; over (b) an exercise price established by the Committee that shall not be less than 100% of the Fair Market Value of the Common Stock on the date of grant. Stock appreciation rights may be granted in tandem with stock options or may be freestanding. The stock appreciation rights shall be exercisable in accordance with such terms and conditions (including achievement of specified objective performance measurements, as determined under Section 11) and during such periods as may be established by the Committee. 9. STOCK UNITS The Committee may grant stock units, which represents a right to receive one share of Common Stock upon the satisfaction of the vesting period or deferral period applicable to such stock unit and upon the satisfaction of any other conditions which the Committee may impose, including the attainment of any performance measures as set forth in Section 11. A stock unit shall be a bookkeeping entry which is entered in an account on behalf of a recipient, and is not a share of Common Stock. The Committee may establish such other terms for stock units as it determines, including, by way of example, the payment of dividend equivalents, or requiring that a grantee pay for any stock units to be awarded. 10. SPECIAL RULES APPLICABLE TO NON-EMPLOYEE DIRECTOR AWARDS In addition to any other stock grants made available under this plan, each non-employee director, effective as of immediately following the election of directors at the Company's annual stockholder meeting, or who became a non-employee director at any time within six months thereafter, shall be granted as of such date (or on the next day the New York Stock Exchange is open for trading) an option exercisable for such number of shares of Common Stock or restricted share awards of Common Stock or other share forms under this plan on such terms as shall be approved by the Committee. 11. PERFORMANCE MEASUREMENTS The Committee may designate whether any award being granted to any grantee is intended to be "performance-based compensation" as that term is used in section 162(m) of the Code. Any such awards designated as intended to be "performance-based compensation" shall be conditioned on the achievement of one or more performance measures, to the extent required by Code section 162(m). The performance measures that may be used by the Committee for such awards shall be based on any one or more of the following, as selected by the Committee: fully diluted earnings per share, Corporate or Division earnings before interest and taxes (with or without a pro forma charge for the cost of capital) in absolute dollars or as a percentage of sales, revenue, sales, profit after tax, gross profit, operating profit, unit volume, return on equity, changes in working capital, return on capital, cash flow, total shareholder return, return on net capital employed, average net capital as a percent of sales, manufacturing efficiency, new product development project milestone dates, information technology systems implementation project milestone dates, cost of quality, and purchase price variance. For awards under this Section 11 intended to be "performance-based compensation," the grant of the awards and the establishment of the performance measures shall be made during the period required under Code section 162(m). 12. WITHHOLDING OF TAXES The Company may permit or require, as a condition to any grant under the Plan or to the delivery of certificates for shares issued hereunder, that the grantee pay to the Company, in cash or, unless otherwise determined by the Company, in shares of Company Common Stock valued at Fair Market Value on the date as of which the withholding tax liability is determined, any federal, state or local taxes of any kind required by law to be withheld with respect to any grant or any delivery of shares. The Company, to the extent permitted or required by law, shall have the right to deduct from any payment of any kind (including salary or bonus) otherwise due to a grantee any federal, state or local taxes of any kind required by law to be withheld with respect to any grant or to the delivery of shares under the Plan, or to retain or sell without notice a sufficient number of the shares to be issued to such grantee to cover any such taxes. In the event of a transfer of an option pursuant to Section 14, the grantee shall remain liable for any tax required to be withheld. 13. WRITTEN AGREEMENT Each person to whom a grant is made under the Plan shall enter into a written agreement with the Company that shall contain such provisions, consistent with the provisions of the Plan, as may be established by the Committee. 14. TRANSFERABILITY To the extent required to comply with Rule 16b-3 and in any event in the case of an incentive stock option, no option or restricted share award granted under the Plan shall be transferable by a participant otherwise than by will or the laws of descent and distribution, or as permitted by this Section 14. The Committee may, in its discretion, authorize all or a portion of the options granted to a participant to be transferred to: (a) a member of the participant's family; (b) a trust or trusts for the exclusive benefit of members of the participant's family; (c) a family partnership, family limited partnership, or family limited liability partnership or company; (d) a charitable or non-profit organization, trust or foundation under Section 501(c)(3) of the Code; or (e) such other person or entity as the Committee may in its discretion permit. An option may be exercised only by the grantee thereof, his permitted transferee or his or her guardian or legal representative. Subsequent transfers of options transferred pursuant to this Section 11 shall be prohibited except those by will or the laws of descent and distribution. Following any permitted transfer, any transferred options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer and such options shall be exercisable by the transferee only to the extent and for the periods that they would have been exercisable by the participant. 15. LISTING AND REGISTRATION If the Company determines that the listing, registration or qualification upon any securities exchange or under any law of shares subject to any option or restricted share award is necessary or desirable as a condition of, or in connection with, the granting of same or the issue or purchase of shares thereunder, no such option may be exercised in whole or in part and no restrictions on such restricted share award shall lapse, unless such listing, registration or qualification is effected free of any conditions not acceptable to the Company. Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933) and the applicable requirements of any securities exchange. 16. TRANSFER OF EMPLOYEE Transfer of an employee from the Company to a subsidiary, from a subsidiary to the Company, and from one subsidiary to another shall not be considered a termination of employment. Nor shall it be considered a termination of employment if an employee is placed on military or sick leave or such other leave of absence which is considered as continuing intact the employment relationship; in such a case, the employment relationship shall be continued until the date when an employee's right to reemployment shall no longer be guaranteed either by law or contract. 17. ADJUSTMENTS; BUSINESS COMBINATIONS In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, share exchange, consolidation, distribution of assets, or any other change in the corporate structure or shares of the Company, the Committee shall make such adjustments as it deems appropriate in the number and kind of shares reserved for issuance under the Plan, in the number and kind of shares covered by outstanding options, stock appreciation rights and restricted share awards made under the Plan, and in the exercise price of outstanding options and stock appreciation rights. In the event of any Change in Control, all outstanding options, stock appreciation rights and restricted share awards shall vest and shall be exercisable notwithstanding any restriction on vesting or exercise, at a date to be determined by the Committee not later than the effective date of the transaction. 18. TERMINATION AND MODIFICATION OF THE PLAN The Board of Directors, without further approval of stockholders may modify or terminate the Plan, except that no modification shall become effective without prior approval of the stockholders of the Company if stockholder approval would be required for continued compliance with Rule 16b-3 or the rules of the New York Stock Exchange or other applicable exchange, or if such modification would materially increase the benefits to participants under the Plan, materially increase the number of securities which may be issued under the Plan, or materially modify the requirements for participation in the Plan. Except with the approval of the Company's stockholders, no modification may be made to the provisions of Section 3 or Section 6(a) concerning the repricing of any outstanding stock option. The Committee shall be authorized to make minor or administrative modifications to the Plan as well as modifications to the Plan that may be dictated by requirements of federal or state laws applicable to the Company or that may be authorized or made desirable by such laws. 19. LIMITATION ON BENEFITS With respect to persons subject to Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under such Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 20. EFFECTIVE DATE; TERMINATION DATE The Plan is originally effective as of May 23, 2002 and is amended and restated effective May 20, 2004. Unless previously terminated, the Plan shall terminate at the close of business on May 23, 2012, ten years from the original effective date EX-31.1 5 w99481exv31w1.txt CEO CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT Exhibit 31.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, C. DAVID MYERS, Chief Executive Officer of York International Corporation, certify that: 1. I have reviewed this quarterly report on Form 10-Q of York International Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: August 4, 2004 /s/ C. David Myers ------------------------------------- C. David Myers, President and Chief Executive Officer EX-31.2 6 w99481exv31w2.txt CFO CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT Exhibit 31.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, M. DAVID KORNBLATT, Chief Financial Officer of York International Corporation, certify that: 1. I have reviewed this quarterly report on Form 10-Q of York International Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: August 4, 2004 /s/ M. David Kornblatt ------------------------------------- M. David Kornblatt, Vice President and Chief Financial Officer EX-32.1 7 w99481exv32w1.txt CEO AND CFO CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of York International Corporation (the "Company") for the quarter ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned C. David Myers, President and Chief Executive Officer of York International Corporation, and M. David Kornblatt, Vice President and Chief Financial Officer of York International Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 4, 2004 /s/ C. David Myers ------------------------------------ C. David Myers, President and Chief Executive Officer /s/ M. David Kornblatt ------------------------------------ M. David Kornblatt, Vice President and Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to York International Corporation and will be retained by York International Corporation and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----